Thursday December 4, 2008 - 14:08:52 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro, pound arrest losses; c.banks deliver big cuts
* Euro, sterling sentiment shaky in race to cut rates
* ECB cuts rates 75 bps, BoE by 100 bps
* Riksbank slashes rates by 175 bps, RBNZ cuts by 150 bps
(Adds quotes, updates prices)
By Veronica Brown
LONDON, Dec 4 (Reuters) - The euro and sterling arrested
early falls against the dollar on Thursday, but remained shaky
as euro area and UK interest rates were lowered in the global
central bank drive to ward off a prolonged global slowdown.
Worries about world economic health also kept investors wary
of taking on riskier positions, helping to boost the
low-yielding yen broadly.
A surprisingly big 175 basis point cut in Swedish borrowing
costs earlier [ID:nWEA7995] and a swingeing 1.5 percentage point
move from the Reserve Bank of New Zealand [ID:nWEL81490] had
already set the tone for aggressive action.
The ECB, seen by some market participants as being behind
the curve in lowering borrowing costs to boost growth, went for
a bolder than expected 75 basis point cut to 2.50 percent.
The BoE opted to cut its borrowing costs by 100 basis points
to 2 percent, slightly disappointing some in the market who had
speculated on similar move to the 150 basis point reduction
imposed in November.
"The central banks are responding with considerable verve.
They recognise the urgency with which they have to cuts rates
(and) I don't think this is surprising anybody. If it was any
less the markets would have been a bit upset about it," said
Mike Lenhoff, chief strategist at Brewin Dolphin in London.
At 1317 GMT, the euro had fallen 0.7 percent against the
dollar <EUR=> to $1.2632, trimming earlier losses, while the
pound was down 0.7 percent to $1.4653, having earlier hit a
6-3/4 year low of $1.4471.
The pound hit a record low against the euro at 86.95 pence
<EURGBP=>. The yen gained, with the dollar <JPY=> last down 0.6
percent at 92.80 yen, while the euro fell 1.2 percent to 117.12
ECONOMIC WOES WEIGH
Falling interest rates across the globe take away the yield
attraction of currencies whose countries previously had high
interest rates, giving further support to the yen and the dollar
and weighing on higher-yielding units.
Meanwhile, news on the deteriorating state of economies
around the world continued to weigh on market sentiment.
Data on Wednesday showed the U.S. service sector posting its
worst slump on record while U.S. private employers cut 250,000
jobs in November, the biggest number in seven years.
"We have entered the eye of the storm in terms of terrible
data, with yesterday's ISM report suggesting U.S. nonfarm
payroll losses tomorrow in excess of 500,000. This only serves
to increase risk aversion," ING currency strategist Tom Levinson
said in a note to clients.
(Reporting by Veronica Brown; Editing by Victoria Main)
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