Wednesday December 3, 2008 - 21:52:18 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar little changed; ECB, BOE rate meetings ahead
* Dollar little changed after stocks rally in late session
* Beige book sees economy weaken across US
* Market awaits rate decisions from ECB, BoE
* For up-to-the-minute market news, click on FXNEWS
(Recasts, updates prices, adds quotes, changes byline)
By Wanfeng Zhou
NEW YORK, Dec 3 (Reuters) - The U.S. dollar and the yen
traded little changed against major currencies on Wednesday,
paring earlier gains after stocks staged a late rally on Wall
The euro and the British pound came under pressure through
most of the session ahead of interest rate decisions by central
banks in the euro zone and Britain. Expectations are high that
they will ease monetary policy aggressively to boost flagging
economies and counter the threat of deflation.
U.S. stocks ended higher in choppy trading, diminishing
demand for the safe-haven greenback and the low-yielding yen.
But analysts said worries over a slumping global economy
continue to weigh heavily on sentiment in financial markets.
"Volatility continues to be extremely high. Traders really
tend to be risk averse in this type of atmosphere," said Matt
Esteve, a foreign-exchange trader at Tempus Consulting in
Washington. "You'll continue to see risk aversion through the
end of the year."
In late trading in New York, the euro <EUR=> was flat at
$1.2708 after struggling earlier because of data showing
further deterioration in the euro zone's services sector.
In its Beige Book report released on Wednesday, the Federal
Reserve said economic activity has weakened across the country
since early October. Earlier this week, a panel of experts
formally declared the U.S. economy in recession since December
2007. See [ID:nWEQ000447].
The dollar was little changed at 93.34 yen <JPY=> after
earlier touching 92.55 yen, a five-week low. The euro was also
flat against the yen at 118.60 <EURJPY=>.
The New Zealand dollar showed a limited reaction after the
country's central bank cut interest rates by a record 150 basis
points to 5.0 percent. The move was widely expected. See
EUROPEAN RATE MEETINGS
Sterling fell broadly after data showed that the UK
services sector shrank faster than expected in November
[ID:nL2553471]. The news boosted expectations that the Bank of
England may slash rates by at least a full percentage point
from 3.0 percent on Thursday to shore up the domestic economy.
"The British pound has been very weak, reflecting the
market's expectation for a larger rate cut," said Kathy Lien,
director of currency research at GFT Forex in New York.
"There is a risk of a 125 basis points rate cut if the Bank
of England continues to be proactive. Since their next interest
rate cut will certainly not be their last, they may decide to
do more now than later," she said, in a research note.
Sterling was last down 0.9 percent against the dollar at
The European Central Bank is seen cutting rates on Thursday
by at least 50 basis points to 2.75 percent, but many
economists are expecting a 75 basis point cut.
As the global economy slows sharply in recent months,
investors have rewarded currencies of countries that have
aggressively cut interest rates, analysts said.
"It's kind of counterintuitive. Usually lower interest rate
equals lower currencies, but as of late the market really has
rewarded central banks that have been proactive and trying to
stave off a deep recession," Tempus Consulting's Esteve said.
(Additional reporting by Nick Olivari, Editing by Chizu
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