Tuesday November 11, 2008 - 10:08:15 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro supported as sterling slides, ZEW awaited
* Euro up 0.4 pct vs dlr as euro/stg nears record high
* European shares down 2.3 pct, capping risk demand
* Market awaits ZEW survey at 1000 GMT, sentiment seen low
(Changes byline, releads, updates throughout, previous TOKYO)
By Naomi Tajitsu
LONDON, Nov 11 (Reuters) - The euro rose against the dollar
and the yen on Tuesday as traders brushed off a slide in share
prices and focused on the single European currency's rally,
nearing a record high against a broadly weaker sterling.
The UK currency fell broadly, pushing its value on a
trade-weighted basis to its lowest in 12 years on concerns that
the UK economy will suffer even as the government bails out the
banking sector and plans fiscal measures to boost growth.
The euro was well supported in early trade, but weak global
shares kept a lid on risk demand before German data due later in
the day which was expected to show ongoing pessimism about the
euro zone economy.
European shares fell 2.3 percent in early trade,
capping euro gains, and analysts said that investors would
likely continue to dump risky assets, including assets
denominated in currencies like the euro and sterling, which
would likely keep the dollar supported.
"The market is trying to define its range and once that
range is decided the next step is to work out which direction to
move in, and the bias is still towards dollar strength," said
Divyang Shah, chief strategist at Commonwealth Bank of Australia
The euro <EUR=> rose 0.4 percent to $1.2787, supported by a
0.4 percent climb against sterling to 81.94 pence, near a record
high of 82.98 pence hit on Monday.
The single European currency had slipped as low as $1.2677
in Asian trade after regional shares took a hit on worries about
weak U.S. earnings as the global economy faces a recession.
Sterling <GBP=> was steady against the dollar at $1.5605,
after falling as low as $1.5558. The UK currency suffered
against the euro, and to a lesser extent the dollar, which
pushed it to 84.6 against a basket of currencies, its weakest
level since September 1996.
Against the yen, the single European currency inched up
around 0.2 percent to 125.05 yen <EURJPY=R>.
Despite its slide against the euro, the Japanese currency
rose against sterling <GBPJPY=R> and the Australian dollar
<GBPJPY=R> as higher yielders remained under selling pressure
due to ongoing jitters about the global economic outlook.
This kept demand high to reverse carry trade positions,
where low-yielding currencies like the yen are used to buy
assets in higher-yielding ones.
The Japanese currency was supported against the dollar
<JPY=>, which fell 0.2 percent to 97.85 yen.
The German ZEW survey due at 1000 GMT is expected to show
that investor morale has stayed low in November after plummeting
well beyond expectations last month. Forecasts for economic
sentiment are for a reading of -62, little changed from -63 in
Analysts anticipate a weak reading, which will add to
evidence that the euro zone economy. This has cranked up calls
for the European Central Bank to keep cutting interest rates
following a 50 basis point easing to 3.25 percent last week.
The ZEW survey will land ahead of a reading of third-quarter
euro zone growth figures due later in the week, which many
expect will show that the region's economy is in a technical
recession -- two consecutive quarters of negative growth.
"Going forward, we expect growth conditions in the euro zone
to keep on weakening, with further easing in rates to come, and
under such conditions the EUR will likely remain under
pressure," UBS analysts said in a research note.
ECB council member Guy Quaden on Tuesday was quoted by media
as saying that the central bank expects to cut growth and
inflation forecasts substantially next month, suggesting that
the ECB acknowledges economic weakness [nWLB3320].
The comments came after ECB President Jean-Claude Trichet on
Monday said that the central bank does not rule out the
possibility of cutting rates further next month, keeping
expectations high that further monetary loosening lies ahead.
(Editing by Andy Bruce)
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