Monday December 15, 2008 - 10:45:56 GMT
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Reuters - www.reuters.com
FOREX NEWA-Dollar on defensive on uncertainty over U.S. carmakers
* Dollar slides across board, hits 2-mth low vs euro
* Dollar hits 2-mth low vs basket of currencies .DXY
* Rise in share prices boosts higher-yielding currencies
* Focus on fate of U.S. automakers, Fed rate decision
(Releads, adds quotes, prices, changes dateline prvs TOKYO)
By Tamawa Desai
LONDON, Dec 15 (Reuters) - The dollar hit a two-month low
against the euro and a basket of currencies on Monday, as
investors shunned the U.S. unit on uncertainty surrounding the
fate of ailing U.S. automakers and its possible economic impact.
The White House said on Friday it was considering tapping a
$700 billion financial industry bailout fund to prevent a
collapse of ailing U.S. automakers [ID:nWAT010655].
That came after the U.S. Senate on Thursday rejected a
bailout plan to avert a possible bankruptcy by one or more of
the nation's three automakers.
But U.S. President George W. Bush said on Monday an
announcement on a car industry rescue was not imminent, leaving
the industry's fate clouded for a little longer [ID:nN14461208].
Investors fear a failure of any of the automakers would
exacerbate a year-long recession and drag other companies under.
By 0919 GMT, the euro was up 0.7 percent against the dollar
at $1.3470 after hitting a two-month high of $1.3500 <EUR=>
earlier in the day, according to electronic platform EBS.
The dollar also hit a two-month low against a basket of
currencies at 82.994 .DXY.
"Support for the dollar has waned with repatriation funds
drying up and global deleveraging decreasing on signs of
stability in currency markets," said David Powell, strategist at
Bank of America in London.
The dollar also remained under pressure ahead of the Federal
Reserve's policy-setting meeting, which begins later on Monday.
The Fed is widely expected to cut rates by at least a
half-percentage point to 0.5 percent from 1 percent on Tuesday
at the conclusion of its two-day policy meeting. With interest
rates rapidly approaching zero, the Fed may also indicate more
steps to provide liquidity into the market.
"The tide seems to have turned around in recent sessions,
with bad U.S. economic news now hurting the dollar rather than
helping it," said UBS analysts in a research note.
A broad rebound in share prices also eased extreme risk
aversion, prompting buying of higher-yielding currencies. The
Australian dollar rose 0.8 percent <AUD=> and New Zealand dollar
was up nearly 1.5 percent <NZD=>.
European shares edged up 0.25 percent after stock prices in
Asia rose on revived bailout hopes for the U.S. auto sector.
The yen fell slightly against the dollar <JPY=>, after
hitting 13-year highs of 88.10 yen on Friday. Yen gains were
capped on speculation that Japanese authorities could intervene
to curb further rapid appreciation.
Market reaction was limited to the Bank of Japan's quarterly
tankan survey showing corporate sentiment deteriorated sharply.
The headline index for big manufacturers' sentiment fell to
a nearly seven-year low of minus 24, down from minus 3 in the
previous survey in September. [ID:nT66530]
(Editing by Mike Peacock)
Â© Thomson Reuters 2008 All rights reserved
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