Monday November 3, 2008 - 13:02:28 GMT
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Reuters - www.reuters.com
FOREX NEWS-Easing risk aversion cools dollar, yen rally
* Dollar, yen ease after stunning Oct as risk aversion cools
* World stocks in positive territory
* Global recession fears persist, further deleveraging seen
* U.S. election eyed
(Adds quotes, update prices, changes byline)
By Veronica Brown
LONDON, Nov 3 (Reuters) - The euro and high-yielding
currencies rose against the dollar on Monday, while the yen
retreated broadly as abating risk aversion lifted stocks.
The scale of investors' deleveraging was highlighted in
October, when the dollar index .DXY posted its biggest monthly
percentage gain in 17 years and the euro suffered its largest
monthly fall against the dollar and yen since its 1999 launch.
Concern about the prospect of a global recession was
expected to limit gains in riskier assets and offer support to
the low-yielding dollar and yen.
"The problem for the market is that all the trades that
worked well for the past 5 years went badly very quickly," said
Michael Rosborough, senior global FX strategist at Citigroup in
"On bounces like this you would expect to see people still
liquidating and using them as an opportunity to lighten up on
positions," he added.
By 1200 GMT, the euro was up 0.9 percent on the day at
$1.2845 <EUR=> and rose 1.6 percent to 127.34 yen <EURJPY=>.
Sterling rose around 0.7 percent against the dollar to
$1.6190 <GBP=>, while the dollar gained 0.7 percent to 99.14 yen
<JPY=>. The high-yielding Australian and New Zealand dollars
also rose around 1.4 percent versus the U.S. currency.
World stocks, as measured by MSCI's all-country index, rose
0.9 percent on the day .MIWD00000PUS.
MORE RATE CUTS IN SIGHT
Major events this week include the U.S. presidential
election on Tuesday [ID:nN02470309], with a win by Democrat
Barack Obama generally seen as more favourable for financial
Also, the European Central Bank, the Bank of England and the
Reserve Bank of Australia are all expected to lower interest
rates to protect their struggling economies from the threat of a
looming global recession.
Each of them is expected to cut rates by at least half a
percentage point. The U.S. Federal Reserve last week cut its key
rate by half a point to 1.0 percent and the Bank of Japan (BoJ)
cut its rate to 0.30 percent from 0.50 percent.
Analysts said Britain's central bank could cut rates by more
than the half percentage point that is expected.
"The risks are tilted toward an even larger move, as the
upside risks to inflation have diminished significantly,
according to resident BoE hawk (Tim) Besley," RBC strategists
said in a note to clients.
Emerging giants China and India also cut rates last week.
Economic weakness was underscored by a report on euro zone
manufacturing activity, which sank in October below record low
levels initially estimated.
The Markit Eurozone Purchasing Managers Index for the
manufacturing sector fell to 41.1 -- the lowest in the survey's
11-year history -- from September's 45.0. That was below the
flash estimate and economists' forecasts of 41.3.
The release marks the fifth consecutive month the PMI index
has been below the 50 mark that divides growth from contraction.
The U.S. Institute of Supply Management's factory activity
index, due out at 1500 GMT, is also expected to show further
weakness. Economists expect a reading of 41.5 versus 43.5 in
(Reporting by Veronica Brown; editing by Swaha Pattanaik)
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