Thursday December 11, 2008 - 10:33:08 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro hits 6-week high vs dollar; SNB cuts rates
* Euro hits 6-wk high at $1.3158 <EUR=>, dollar index falls
* SNB cuts rates by 50 bps, as expected
* U.S. auto deal makes progress, rocky road seen in Senate
(Changes dateline, byline, adds quotes, new prices; pvs TOKYO)
By Veronica Brown
LONDON, Dec 11 (Reuters) - The euro hit a six-week high
against a broadly weaker dollar on Thursday with doubts
beginning to creep in as to whether projected pent-up demand for
the U.S. currency would materialise over the year-end.
Dealers also cited technical momentum in favour of the euro,
having vaulted the $1.30 level, while markets were still keeping
a keen eye on chequered progress of a bailout for the troubled
U.S. auto sector.
The Swiss National Bank became the latest leading central
bank to cut interest rates, but its impact was limited as the 50
basis point move paled in comparison with more dramatic
reductions from other central banks last week.
Having climbed thanks to a wave of risk aversion in recent
months, in tandem with the low-yielding Japanese yen, some
analysts said pent up demand for the U.S. unit from deleveraging
flows might be showing some sign of cooling.
"There was strong consensus that the requirement for dollars
over the end-year period would see the dollar pushed higher, but
that doesn't seem to be materialising," said Adam Cole, global
head of currency strategy at RBC Capital Markets in London.
"For that reason people are beginning to question how strong
the dollar stays near-term," he said.
Expectations for big European Central Bank rate cuts cooled
after Executive Board member Juergen Stark said late on
Wednesday the bank did not have a lot of room for manoeuvre
after its cut last week, and that any further reductions could
be done only in small steps.
Despite a spike up in euro/dollar after his comments,
economists were sanguine about the impact on sentiment.
"Interest rate differentials play a minor role at the
moment. But ... it's not good for Euroland that the ECB does not
have so much room for manoeuvre," said Elisabeth Andrew, senior
strategist at Nordea in Copenhagen.
By 0924 GMT, the euro was up 0.8 percent on the day at
$1.3113, having hit a six-week high of $1.3158 earlier in the
Against a basket of currencies, the dollar was down 0.7
percent at 84.829 .DXY, while it also dipped 0.4 percent
versus the yen to 92.25 yen <JPY=>.
The dollar traded up at 1.1920 Swiss francs compared with
1.1905 francs <CHF=> just before the SNB rate decision, and the
euro rose to 1.5640 francs from 1.5625 francs <EURCHF=>.
CRACKS IN GLOBAL PLAN?
There was little reaction in FX markets to the approval of a
$14 billion auto industry bailout plan by the U.S. House of
While the House stuck to its plan, uncertainty was seen in
the Senate, where a razor-thin Democratic majority cannot ensure
passage. A vote could come as early as Thursday, but some
Republicans have vowed to slow or even block the legislation.
Elsewhere, cracks were appearing in the global effort to
drag the world out of recession on Thursday with Germany
attacking Britain ahead of an EU summit for rushing into debt to
bail out industries and pump up growth. [nLB344189]
In an interview with Newsweek magazine, Finance Minister
Peer Steinbrueck urged governments to pause before pledging to
spend billions of dollars to try to push their economies out of
(Reporting by Veronica Brown; Editing by Mike Peacock)
Â© Thomson Reuters 2008 All rights reserved
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