Friday November 28, 2008 - 20:03:21 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar rises vs euro amid risk aversion, thin volume
* Dollar rises vs euro as risk aversion persists
* ECB seen cutting rates more aggressively; hurts euro
* Indian Rupee falls after attacks
* For up-to-the-minute market news, click on FXNEWS
(Updates prices, adds comments)
By Vivianne Rodrigues
NEW YORK, Nov 28 (Reuters) - The dollar rose versus the
euro in thin trade on Friday as volatile equity markets and
fears of a deepening global recession led investors to seek
the U.S. currency as a haven.
Extreme risk aversion and repatriation flows have been
supporting the U.S. currency recently.
Selling pressure on the euro also mounted, with the single
currency also falling against the yen and sterling on growing
expectations that slowing euro-zone inflation may lead policy
makers to cut rates more aggressively next week from the
current 3.25 percent.
Trading volumes were lower than usual as U.S. markets
reopened for only half a day after the Thanksgiving holiday.
"Trading is very thin, with the dollar getting support
from a drop in global equities and fear the start of this
shopping season is going to be really bad," said Greg
Salvaggio, a currency trader at Tempus Consulting in
Washington, D.C. "Euro/dollar is going to be stuck in a
narrow trading range between 1.26 and 1.30 for now."
In early afternoon trading in New York, the euro was down
1.5 percent at $1.2692 <EUR=>, after briefly trading as low as
The dollar was up 1 percent against a basket of six
currencies at 86.543 .DXY. But despite Friday's gains, the
dollar index ended the week down about 1.2 percent.
Some analysts and traders also mentioned sizable month-end
dollar buy-orders at the London currency fixing (1600 GMT)
added support to the U.S. currency.
"Euro/dollar traded at 1.2693 at the fix and extended to
1.2673 immediately after and more stops were flushed out below
1.2690," currency analysts at Action Economics said in a
"Expectations of an aggressive ECB rate cut next week,
coupled with global recession fears, has seen safe-haven plays
dominate into the weekend," they added.
Political jitters may also have helped the dollar after
militants killed more than 100 people in Mumbai, India's
financial center, in coordinated attacks. For details, see
The Indian rupee weakened on Friday after the attacks. The
partially convertible rupee <INR=IN> ended 1.2 percent lower
at 50.09/12 per dollar from its close on Wednesday. Markets
were shut on Thursday following the attacks.
"It's another 'negative' looming in the markets,"
Salvaggio said. "It may also be giving a bit of a lift to
Treasuries and the dollar this morning."
The Russian ruble fell after news that Russia's central
bank allowed the currency to weaken by one percent versus the
euro-dollar basket on Friday, for the third time in November.
The bank also raised benchmark interest rates. See
PLENTY OF CENTRAL BANK MEETINGS
Looking ahead to next week, markets were bracing for
interest-rate decisions by several central banks next week,
including the Bank of England, the European Central Bank, the
Reserve Bank of Australia and the Reserve Bank of New
Provisional figures showed euro-zone annual inflation
slowed to 2.1 percent in November from 3.2 percent in October.
"The ECB seems to be lagging behind the curve. Now that
the region has officially hit a recession, it is possible that
they will be more aggressive in easing rates," said Kathy
Lien, director of currency research at GFT Forex in New York.
"The only factor holding them back is inflation pressures.
Although producer and consumer prices have been easing, the
central bank is not entirely convinced that the upside risks
to prices have alleviated," she added.
The euro was last trading 1.5 percent lower at 121.26 yen
<EURJPY=>, after dropping to as low as 120.50. The dollar was
up 0.1 percent at 95.49 yen <JPY=>.
(Reporting by Vivianne Rodrigues; Editing by Jan Paschal)
Reuters journalists are subject to an Editorial Handbook which requires
fair presentation and disclosure of relevant interests
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