Wednesday December 10, 2008 - 21:20:56 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar dips as auto bailout hopes boost risk tolerance
* Dollar dips vs euro, yen slides on US auto bailout hopes
* BoJ's Shirakawa comments on FX market weigh on yen
* Pimco's El-Erian says USD gains to fade sometime in 2009
* For up-to-the-minute market news, click on FXNEWS
(Updates prices, adds quotes, changes byline)
By Steven C. Johnson
NEW YORK, Dec 10 (Reuters) - The dollar fell to a two-week
low against the euro on Wednesday and the yen weakened as U.S.
lawmakers reached tentative agreement to extend emergency loans
to the ailing auto industry, helping to calm investor anxiety.
Stocks rose and investors' rush into safe-haven assets such
as U.S. Treasury debt slowed, temporarily undermining the
dollar's appeal and lifting other currencies such as the euro.
The low-yielding yen also fell as the pendulum swung back
in favor of currencies and assets that offer a higher return.
The impetus for Wednesday's moves was news the White House
and Congressional Democrats had reached a deal in principle on
a $15 billion plan to help automakers restructure and avoid
bankruptcy For details, see [ID:nN10505833].
"It's safe to say risk appetite has improved somewhat, and
that has a lot to do with talk of an imminent bailout for the
U.S. auto industry," said Omer Esiner, chief market analyst at
Ruesch International in Washington.
With the year winding down, Esiner also said investors are
taking profits on the dollar's recent rise. That has added to
pressure on the U.S. currency and may persist into January.
Late afternoon, the euro was up 0.8 percent at $1.3022
<EUR=> after earlier hitting a two-week high of $1.3070. It
rose 1.4 percent to 120.70 yen <EURJPY=> while the dollar added
0.6 percent to 92.64 yen <JPY=>.
The yen also fell sharply against the Canadian dollar
<JPYCAD=R>, the Swiss franc <JPYCHF=R> and the pound
<JPYGBP=R>, according to Reuters data.
Analysts said fears of Bank of Japan intervention to
prevent too much yen strength also weighed on the currency
after BoJ Governor Masaaki Shirakawa said on Wednesday he was
watching forex moves carefully. [ID:nTKF003197]
Sterling rose 0.4 percent to $1.4789 <GBP=> while the
dollar fell 0.6 percent to 1.1985 Swiss francs <CHF=>.
MORE RISK AVERSION TO COME
Analysts were quick to point out, however, that the
uncertainties facing the global economy meant a relapse into
risk aversion was still likely.
One sign of just how parlous the economic outlook is came
when China said its exports and imports shrank unexpectedly in
November, sparking fears that global demand has vanished.
In the United States, while an auto deal looked set to pass
the House of Representatives, some Republicans sowed doubts
about possible snags in the Senate [ID:nWEN162].
That weakened stock markets and helped the dollar and yen
pare some of the losses seen earlier in the session, though
both remained down on the day.
In the longer run, though, analysts expect the dollar's
rise to fade next year as markets stabilize and investors stop
seeking relative safety in the U.S. currency.
"If you analyze why the dollar has strengthened, it has
more to do with the rest of the world than with the U.S.," said
Mohamed El-Erian, co-chief of Pacific Investment Management Co,
at a Reuters Investment Summit in New York on Wednesday.
The euro and sterling, for instance, fell sharply as the
euro zone and British economies slowed and their central banks
cut interest rates.
He said when "that stock adjustment is over, which we
believe will be in 2009, the dollar (will fall)" but added that
it's still premature to bet against the greenback.
"You don't want to be 'shorting' the dollar until you have
evidence the de-leveraging has run its course. Our sense is
that ... three-fourths of the de-leveraging has taken place."
(Additional reporting by Nick Olivari; Editing by Chizu
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