Monday November 17, 2008 - 11:55:33 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dlr falls broadly on stg bounce, risk aversion intact
* Dlr falls broadly; driven largely by sterling gains <GBP=>
* G20 meeting seen long on rhetoric, short on specifics
* Risk aversion intact; stock markets on defensive
* Japan slips into recession in Q3
(releads, adds quotes, updates prices)
By Veronica Brown
LONDON, Nov 17 (Reuters) - The dollar fell on Monday, driven
largely by a bounce in sterling, but risk-averse positions were
seen staying in favour after the weekend G20 meeting failed to
yield specific action to restore global market confidence.
The low-yielding yen rose as risk-wary traders picked up the
currency, shrugging off data showing Japan joined the euro zone
in recession. A weakening global outlook was underlined by U.S.
data on Friday showing a record fall in retail sales in October.
(For details please double click on [ID:nN14423234])
Britain will suffer its sharpest economic contraction in
almost two decades next year, and unemployment could rise to
almost 3 million by 2010, the Confederation of British Industry
Leaders of 20 leading economies, meeting in Washington over
the weekend, agreed on a host of steps to rescue the global
economy from the worst financial crisis in 80 years. But they
left it to individual governments to tailor their response to
their own circumstances and troubled industries.
"If anyone was looking for a silver bullet in the first
place on the G20, then they were set up for a disappointment,"
said Michael Rosborough, senior global currency strategist at
Citigroup in London.
"There's not a lot of incentive right now to put on risk. We
may see bounces, but the overall environment in terms of
risk-taking is not fully stabilised," he added.
By 1135 GMT the dollar was down 0.6 percent on the day at
96.40 yen <JPY=>, while the euro was up slightly at $1.2642
Dealers said the dollar's turn lower came as sterling
bounced sharply from 6-1/2 year lows hit last week.
Profit-taking on the dollar took sterling up more than 1.2
percent on the day to session highs above $1.49 <GBP=>.
Sterling also managed to outperform against the euro, with
the single currency last down roughly 1 percent at 84.85 pence
Traders and analysts were sceptical however on the pound
against a backdrop of worsening British economic conditions.
While the euro squeezed out gains against the dollar,
risk-wary investors kept it pressured with euro/yen down 0.8
percent at 121.90 yen <EURGBP=>.
RISK AVERSION INTACT
European share prices reflected the overall risk averse
atmosphere, with the FTSEurofirst 300 Index extending early
losses to stand down 2.2 percent.
Japan's Nikkei share average rose 0.7 percent .N225,
despite data showing Japan slid into recession in the third
quarter along with the euro zone. [JPGD1=ECI] [ID:nSP354083].
Analysts said the overall preference for unwinding riskier
FX positions, favouring the low-yielding dollar and yen, would
stay in focus as investors concentrated on prospects for a
prolonged global recession.
"We see little reason for de-leveraging as a key theme in
global markets to abate and we continue to look for further yen
and dollar strength over the coming 1-3 months, at the expense
of the high yielding currencies and the euro," UBS strategists
said in a note to clients.
The Australian dollar initially sank more than 1.5 percent
to US$0.6363 <AUD=> earlier in the global session, but then
jumped quickly towards $0.65.
Dealers suspected the Reserve Bank of Australia was
intervening in the market in Asian trade, but the central bank
would not confirm it had acted. The Aussie was last steady on
The RBA intervened on at least two occasions last week,
buying the Aussie around $0.6350 when the market was disorderly
and lacking liquidity.
(Reporting by Veronica Brown; Editing by Ruth Pitchford)
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