Thursday December 18, 2008 - 11:54:37 GMT
Share This Story
Reuters - www.reuters.com
FOREX NEWS-Euro surges broadly, hits 2-1/2 mth high vs dlr
* Euro surges broadly, rallies to 2-1/2 month high vs dlr
* Euro hits record high vs sterling above 95 pence <EURGBP=>
* German Ifo index falls more than expected
* Markets keep eye on yen; await BOJ rate decision
(Releads, adds quotes)
By Tamawa Desai
LONDON, Dec 18 (Reuters) - The euro surged across the board
on Thursday, buoyed by expectations that euro zone interest
rates will not fall as steeply as those in other major economies
despite data pointing to worsening German business sentiment.
In thin volatile trade, the euro surged to a 2-1/2 month
high against the dollar at $1.4719. By 1105 GMT, it was up 1.5
percent on the day at $1.4620 <EUR=>.
The single currency also hit a fresh record high against
sterling at 95.04 pence <EURGBP=>, according to Reuters data.
Against the yen, the euro was up 2.5 percent at 128.96,
after hitting a session high of 131.04 yen <EURJPY=> as Japan's
finance minister said currency intervention was an option
available to authorities [ID:nTKF003218].
The euro has been on an upswing since the U.S. Federal
Reserve cut rates -- a benchmark for the return on holding
dollars -- to a historic low near zero on Tuesday and said it
would take "all available tools" to help its economy.
Meanwhile, speculation that UK interest rates could fall
sharply were fuelled by Bank of England Deputy Governor Charles
Bean, who said UK interest rates could fall to zero
Minutes from the Dec. 3-4 rate-setting meeting showed
policymakers had discussed cutting by a larger margin than the
100 basis point easing that took benchmark rates to 2 percent.
That contrasts with recent comments by European Central Bank
members, who seem to be cautious about drastically reducing
rates, where key rates now stand at 2.5 percent.
"The euro is picking up quite a lot of support -- the yield
differentials have moved out and that may well be providing some
support," said Ian Stannard, senior currency strategist at BNP
Rate spreads between the euro zone and other countries have
widened sharply in recent days, reflecting expectations for
interest rate differentials to widen.
The implied euribor/short sterling rate spread widened as
much as 15 basis points to 75 basis points, compared with around
zero at the start of the month.
The euro's rise accelerated despite a weaker-than-expected
reading of the Ifo institute's index on German business
sentiment. The headline index fell to 82.6 in December from 85.8
in November, below expectations of 84.0.
"The Ifo confirms continued deterioration in the German
economy but what is worrying is the pace of decline," said
Audrey Childe-Freeman at Brown Brothers Harriman in London.
Still, "the ECB is reluctant to bring interest rates to zero
and wants to wait in January, after cutting rates sharply in the
past few months," she said.
Earlier this week, ECB President Jean-Claude Trichet said he
was focused on ways to ensure its 175 basis points of rate cuts
since early October were passed on to the real economy.
EYES ON BOJ AND MOF
The dollar <JPY=> rose 0.8 percent to 87.99 yen, but
remained trapped near 87.11, the lowest in more than 13 years.
Recent comments by Japanese officials have kept speculation
intact that authorities may intervene to rein in the currency's
"You want to keep an eye on the yen with the MOF and finance
ministry comments earlier in the day - that might be a catalyst
to watch for euro/yen," said Jeremy Stretch, markets strategist
at Rabobank in London.
"Alternatively it could be a presumption that people are
nervous and that is exacerbating volatility."
Other traders said central bank bids were seen in euro/yen,
but not related to currency intervention.
The Fed's rate cut has raised pressure on the Bank of Japan
to cut rates at a two-day meeting that ends on Friday.
Two-thirds of economists polled by Reuters this week expect
the Japanese central bank to cut rates from the current 0.3
(Additional reporting by Naomi Tajitsu; editing by Patrick
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."