Tuesday November 18, 2008 - 11:53:15 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro slips, dragged lower by weak shares
* Euro/dollar <EUR=> slips 0.3 pct to $1.2605
* Weak shares support dollar as investors dump risky assets
* ECB's Trichet to speak later in the day
(Adds comment, updates throughout)
By Naomi Tajitsu
LONDON, Nov 18 (Reuters) - The euro fell against the dollar
and the yen on Tuesday, as a stream of evidence that the global
economy is continuing to suffer kept demand intact for unwinding
risky positions in favour of low-yielding currencies.
Weak European stocks kept investors wary of risk, after
Asian and U.S. stocks fell on news that Citigroup was axing 15
percent of its work force [ID:nN17468336] and crippled U.S.
automakers were desperate for government loans [ID:nLI286476].
"There was a push down in equities last night and that has
extended into this morning, so we've seen a continuation in
dollar strength and weakness in yen crosses," said Maurice
Pomery, head of currencies at IDEAGlobal.
He added that the frantic dumping in shares and other assets
seen in past months had simmered down as investors complete
deleveraging trades that cut back on risk, and that markets were
awaiting more bad news that could trigger another wave of
Investors awaited a speech by European Central Bank
President Jean-Claude Trichet later in the day for clues on how
much more the bank may cut interest rates after this month's 50
basis point cut to 3.25 percent. Recent in the past few weeks
has shown that the euro zone has fallen into recession.
Also on Tuesday, U.S. Treasury Secretary Henry Paulson and
Federal Reserve Chairman Ben Bernanke will testify to the U.S.
House Financial Services Committee about the Troubled Asset
The euro <EUR=> fell roughly 0.3 percent to $1.2605 by 1120
GMT, pulling back from a session high of $1.2664 earlier in the
day, as European shares .FTEU3 fell 1.6 percent. Against the
yen <EURJPY=R>, the euro was down 0.4 percent at 121.40 yen.
The dollar was little changed at 96.30 yen <JPY=>. It rose
against the Australian dollar <AUD=>, pushing the antipodean
currency 0.3 percent lower.
The Australian dollar stayed under selling pressure after
the Reserve Bank of Australia on Tuesday reinforced expectations
of more interest rate cuts [ID:nSYD83500].
Sterling <GBP=> was little changed at $1.5005, erasing
earlier gains to $1.5093 after a bigger-than-expected fall in UK
consumer price figures showed that inflation is coming off
recent peaks [nLI422016].
Lower inflation would clear the way for more interest rate
cuts by the Bank of England following its shock 150 basis point
chop this month that left rates at 3.0 percent.
Sterling has been clobbered in past months on the view that
the UK recession may be more severe than other nations', while
aggressive rate cuts have diminished the currency's yield
Markets around the world have been hit by the view that the
depth and scope of a global recession may be extensive, and
analysts said that investors were coming to terms with the
possibility that there would be no quick fix for these problems.
Following months of highly volatile trade which has seen the
low-yielding dollar and yen surge as risky assets fall out of
fashion, market participants said that currencies may have
entered a consolidation phase.
"We've been running a long marathon. It feels like some
fatigue has set into the market and we may finally see some
consolidation," said David Bloom, global head of forex research
at HSBC in London.
He added that it was possible that currencies would enter a
period of range trading before the year-end, but added that
those ranges could be larger than normal.
(Reporting by Naomi Tajitsu; Editing by David Stamp and
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