Tuesday December 23, 2008 - 21:47:26 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar gains vs yen, down vs euro in thin trading
* Dollar rises vs yen, but falls against euro
* Dismal housing, growth data weigh on U.S. outlook
* Trading desks thin out as holidays approach
(Updates prices, adds comment, changes byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Dec 23 (Reuters) - The dollar drifted higher
against the yen in thin pre-holiday trade on Tuesday, as
investors continued to lock in profits on the Japanese
currency's recent steep gains, cautious not to push the pair
lower in case Japan intervenes.
Against the euro, the dollar slipped after European Central
Bank President Jean-Claude-Trichet said market participants
have underestimated the importance of the steps the central
bank has taken so far. Analysts said Trichet's comments
suggested that the ECB may hold interest rates steady and not
cut them in January, giving the euro a boost.
"The biggest mover of the day is still dollar/yen, and that
has something to with yen weakness more than anything else
given the risk of Japan intervention," said Matthew Strauss,
senior currency strategist at RBC Capital Markets in Toronto.
"For now, the risk is a little smaller because the dollar
is above 90 yen and verbal intervention from the Bank of Japan
seems to have worked. But traders overall are not willing to
push the dollar lower."
Japan, which is battling a recession, is concerned with
checking the appreciation of the yen in order to protect the
competitiveness of its exporters.
By late afternoon trading in New York, the dollar was
changing hands at 90.81 yen <JPY=>, up 0.7 percent on the day
but not far from last week's 13-1/2-year low near 87 yen.
The euro rose 1.0 percent to 126.91 yen <EURJPY=> and was
0.2 percent higher against the dollar at $1.3972 <EUR=>, well
off a $1.4020 session high.
The euro zone currency gained following Trichet's remarks
at the Paris Montaigne Institute on Tuesday, saying the central
bank's monetary policy efforts have been effective so far. He
added that three-month interbank rates were much lower than
they were in past weeks. For details, see [ID:nWEA0323].
ECB ON HOLD IN JANUARY?
"Trichet's comments suggest that the ECB may hold rates in
January," said Kathy Lien, director of currency research at GFT
Forex in New York. "Despite the euro having risen 13-14 percent
since the November lows, it doesn't seem that Trichet is
willing to commit to cutting interest rates next month."
An earlier poll showed that analysts expected the ECB to
cut benchmark interest rates in January from their current 2.5
percent given the bleak economic outlook for the 15 countries
that use the euro.
U.S. data showing the economy shrank 0.5 percent in the
third quarter and home sales continued to decline had little
impact on a thin currency market since traders had already
priced in the weak numbers [ID:nLN072227]. But that did little
to ease the anxiety about prospects for the U.S. economy going
"The data are still very grim and after seeing the
third-quarter GDP, the market is prepared to see the economy
contract by 4 or even 5 percent in the fourth quarter," said
Brian Dolan, chief currency strategist at Forex.com in
Bedminster, New Jersey.
In other currencies, sterling fell 0.6 percent to $1.4739
<GBP=>, hit by data showing the UK economy contracted 0.6
percent between July and September [ID:nLN438486]. The euro
rose 0.9 percent to 94.79 pence <EURGBP=>, setting up a
possible move to parity over the coming weeks.
The dollar fell 0.7 percent to 1.0850 Swiss francs <CHF=>
but rose sharply against the Australian <AUD=> and New Zealand
<NZD=> dollars. The drop in oil and gold has weighed on these
(Additional reporting by Steven C. Johnson; Editing by
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