Tuesday December 30, 2008 - 12:32:41 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar slides vs euro, pound under pressure
(All UK financial markets are closed on Thursday for the New
Year holiday, and will reopen on Friday, Jan. 2. FX coverage
from London will end around midday on Wednesday, and resume on
* Dollar falls against euro, currency basket
* Pound hits 6-1/2-yr low vs dlr, near parity with euro
* Swiss franc supported by Israel-Hamas conflict
(Adds comment, updates prices)
By Tamawa Desai
LONDON, Dec 30 (Reuters) - The dollar fell against the euro
and a basket of currencies on Tuesday as traders closed out some
positions before the year-end and ahead of data on the U.S.
housing market and consumer confidence later in the day.
The dollar continued to be weighed down and the euro
supported by the contrast of aggressive monetary easing in the
United States versus a more cautious European Central Bank.
Some market participants cited the ongoing attacks against
Hamas in Gaza by Israel, which it says is aimed at halting
rocket attacks by Gazan militants, as hurting the dollar, while
supporting the Swiss franc near a five-month high.
Meanwhile, sterling continued its downtrend, hitting a 6-1/2
year low against the dollar and hovering near record lows in
sight of parity against the euro on prospects of UK interest
rates being slashed further on expectations of a deep economic
By 1135 GMT, the euro <EUR=> was up 1.3 percent on the day
at $1.4164 according to Reuters data.
"The euro has been gaining at the dollar's expense where
sentiment has turned dollar negative as the U.S. Federal Reserve
takes on quantitative easing," said Neil Mellor, currency
strategist at Bank of New York Mellon in London.
The euro's gains were spurred after the dollar's inability
to hold onto gains in previous sessions.
"Yesterday's attempt to push past $1.40 to the euro failed,
and so those positions are being unwound," said Geoffrey Yu,
currency strategist at UBS in London.
"Investors want to be less exposed to the wrong type of
positioning heading into the year end so they're clearing out
The dollar .DXY slipped roughly one percent against a
basket of currencies to 80.540.
U.S. interest rates are close to zero and policymakers have
said they are ready to take more unconventional steps of
providing liquidity to bolster the moribund economy.
In contrast, key interest rates in the euro zone stand at
2.5 percent, and policymakers have been unclear about how much
rates will be cut further in the near future.
European Central Bank Governing Council member Ewald Nowotny
on Tuesday told German newspaper Die Zeit that there is a lot of
uncertainty about the region's economic outlook, and that the
ECB is prepared to act quickly if needed [ID:nWEA0384].
EURO NEAR 98 PENCE
Sterling <GBP=> fell as low as $1.4385, its weakest since
early 2002, according to Reuters data, while the euro
<EURGBP=D4> rose 1.3 percent to 97.75 pence, hovering near a
record high of 98 pence hit on Monday.
The dollar fell 0.4 percent to 1.0544 Swiss francs <CHF=>.
On Monday, it fell to 1.0367 francs, its weakest since late
July, after the Israeli attacks had triggered so-called
"safe-haven" demand for the Swiss currency and gold.
The dollar <JPY=> slipped 0.4 percent to 90.21 yen, inching
lower to 87.13 yen hit earlier in the month, its weakest since
Data on the U.S. housing market, the epicentre of the
year-long recession, will be out later in the day. Case/Shiller
home prices are expected to show a 1.8 percent decline, a repeat
of the previous month's drop.
Separately, consumer confidence in December is expected to
improve slightly, while a reading of factory activity by the
Institute of Supply Management Chicago is expected to worsen.
(Additional reporting by Naomi Tajitsu)
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