Saturday January 3, 2009 - 00:41:09 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar rises to 3-week high versus yen, euro falls
* Dollar rallies to 3-week high versus yen as stocks rally
* Euro, sterling hurt by disappointing economic data
* US manufacturing index lowest since 1980
(Recasts, adds comments, updates prices, changes byline)
By Wanfeng Zhou
NEW YORK, Jan 2 (Reuters) - The U.S. dollar rallied to a
three-week high against the yen on the first trading day of
2009 on Friday after a strong performance on Wall Street
encouraged risk appetite.
The dollar also gained versus the euro, after data showed
deepening recession in the euro zone and as traders deemed the
euro's rapid advance last month was overdone. Thin holiday
trading volumes may have exacerbated currency moves, analysts
"The rise in stocks here in the U.S. and globally, at least
for now, has increased risk appetite," said Omer Esiner, senior
market analyst at Ruesch International in Washington.
"Dollar/yen has benefited from that, particularly in holiday
Risk aversion has seen the low-yielding yen soaring over
the past year, with the dollar losing more than 18 percent
versus the Japanese unit, its worst annual performance since
1987. An improvement in risk appetite tends to be associated
In late trading in New York, the dollar was last up 1.6
percent at 92.22 yen <JPY=>, after trading as high as 92.40,
the highest level since mid-December.
The euro <EUR=> fell 0.9 percent against the dollar to
$1.3862, having earlier hit a session low of $1.3841.
"The dollar was beaten up pretty badly late in December and
that move got carried away, particularly against the euro. That
move was a bit too severe given the economic outlook in the
euro zone and the likelihood that the (European Central Bank)
is going to be lowering interest rates," said Stephen Malyon,
chief currency strategist at Scotia Capital in Toronto.
Investors have shunned the dollar and shifted into euros
recently as the U.S. Federal Reserve cut interest rates to near
zero, while the European Central Bank has adopted a more
gradual approach to cutting interest rates.
"I'm not surprised really to see the dollar pull back a
little bit of ground, but the market right now is so illiquid
that it's very hard to attribute currency moves to any real
fundamental factors," Malyon said.
Further adding pressure to the euro was data released
earlier Friday showing euro-zone manufacturing activity fell to
the lowest in the survey's 11-year history. [ID:nL2197753]
Meanwhile, sterling resumed its downtrend in choppy trade,
after data painted a gloomy picture of the UK economy.
The pound was last down 0.7 percent against the dollar at
The euro pared earlier gains and recently traded up 0.1
percent versus sterling at 95.50 pence <EURGBP=D4>. The pair
had hit a record 98.05 pence earlier this week, within striking
distance of parity.
British mortgage approvals for house purchases fell to a
record low in November [ID:nBOE001688], while a separate Bank
of England survey showed credit conditions looked set to
tighten further in the next three months [ID:nBOE001689].
House prices also fell by a bigger-than-expected 2.2 percent in
The figures reinforced expectations the Bank of England
will cut key interest rates by at least 50 basis points next
week from the current 2 percent.
"U.S. dollar has yet to garner fresh gains versus the pound
as the Bank of England is widely expected to resume its easing
campaign as early as next week with a possible 75 basis points
rate cut," said Ashraf Laidi, chief market strategist at CMC
Markets in London, wrote in a note.
In the U.S., the dollar briefly pared gains after an
industry report showed factory activity fell more than expected
to a 28-year low in December. [ID:nWEN2173]
The dollar index, a gauge of its performance against six
major currencies, rose 0.8 percent to 81.76 .DXY.
(Additional reporting by Vivianne Rodrigues and Nick
Olivari; Editing by Chizu Nomiyama)
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