Tuesday January 27, 2009 - 00:27:59 GMT
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Reuters - www.reuters.com
FOREX NEWS-U.S. dollar, yen fall as risk appetite edges up
* Euro hits one-week high vs dollar as risk aversion ebbs
* Barclays profit forecast boosts sterling
* U.S. home sales up, though driven partly by foreclosure
(Recasts, updates prices, adds comment, changes byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Jan 26 (Reuters) - The dollar fell against the
euro and sterling on Monday, as investors' risk appetite
improved after British bank Barclays said it would report a
2008 pretax profit and U.S. data showed a jump in home sales.
Stocks in Europe and on Wall Street advanced and the dollar
rose against the yen as investors waded back into risky trades
after taking cover last week in the wake of banking sector
worries and signs of a deepening global recession.
The dollar has been the main beneficiary of the economic
downturn around the world. Investors have viewed the currency
as a safe haven amid expectations the United States, the first
major economy to hit recession, will be the first among
industrialized countries to emerge out of the economic slump.
"The positive news from Barclays this morning gave the
market's risk appetite a boost and that's why we have seen the
euro gain a bit, including the dollar versus the yen, and
sterling," said Joe Francomano, vice president of foreign
exchange at Erste Bank in New York.
In addition to forecasting a 2008 profit, Barclays (BARC.L: Quote, Profile, Research, Stock Buzz)
said it would not need new funding. That news overshadowed
announcements of jobs cuts at Caterpillar (CAT.N: Quote, Profile, Research, Stock Buzz), General
Motors (GM.N: Quote, Profile, Research, Stock Buzz) and Home Depot (HD.N: Quote, Profile, Research, Stock Buzz).
In late afternoon trading, the euro was last up 1.4 percent
at $1.3166 <EUR=> after rising to $1.3209, a one-week high,
according to electronic platform EBS. The euro rose 1.6 percent
to 117.18 yen <EURJPY=>, off a roughly seven-year low near 112
hit last week.
Francomano said the euro accelerated gains against the
dollar after it broke a key $1.3150 level, although by late
trading the euro zone single currency had fallen from its
highs. The Erste trader suggested using upside moves in the
euro as an opportunity to sell for profit.
The dollar rose 0.2 percent against the yen to 89.01 yen
DOLLAR RALLY TO PERSIST
Analysts, however, were unsure how long the market's upbeat
mood would last. Banks, retailers and manufacturers announced
thousands of job cuts on Monday and worries about global
economic health remained acute. For more see [ID:nLQ186557].
The International Monetary Fund slashed its forecast for
2009 global growth to 0.5 percent from 2.2 percent in its last
economic outlook in November, a Group of 20 (G20) finance
official told Reuters on Monday.
While the IMF now reckons the U.S. economy will shrink 1.6
percent this year after an earlier forecast of a 0.7 percent
drop, the fund expects it to grow 1.6 percent in 2010.
"The fundamental picture continues to point to a firmer
dollar," said Meg Browne, currency strategist at Brown Brothers
Harriman in New York. "So far, January U.S. data, while still
quite weak and still just one month's data, have come in
somewhat better than expected."
For instance, data on Monday showing a surprise 6.5 percent
rise in sales of existing U.S. homes last month boosted the
dollar against the yen. The headline figure exceeded market
forecasts, though the increase in sales was mainly attributed
to foreclosure transactions.
"That doesn't mean the U.S. economy is bottoming but is a
contrast to the euro zone and UK. In this environment, euro
rallies are unlikely to be sustained for long," Browne said.
Earlier, sterling was pressured after Bank of England
Monetary Policy Committee member David Blanchflower was quoted
on Sunday as saying British interest rates still had a way to
go if they were to follow the United States [ID:nLO542246].
But investors bought sterling back after the Barclays news.
Sterling rose more than 1 percent to $1.3960 <GBP=>, above last
week's 23-year low of $1.3502, according to Reuters data.
The Fed begins a two-day policy meeting on Tuesday, and
with rates already near zero, traders will await the U.S.
central bank's policy statement for pointers on what assets the
Fed may purchase to ease credit strains, analysts said.
(Additional reporting by Steven C. Johnson; Editing by James
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