Wednesday January 28, 2009 - 11:36:01 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro gains vs dlr, yen; risk aversion eases as Fed eyed
* Euro gains vs dollar, yen as risk aversion ebbs further
* European stocks rise 1.7 percent; Fed meeting eyed
* Market awaits news of more Fed measures to boost economy
* Weak Swiss data dents franc; RBNZ seen cutting rates
(Adds quotes, updates prices)
By Jessica Mortimer
LONDON, Jan 28 (Reuters) - The euro gained against the
dollar and the yen on Wednesday, helped by rising equities and
easing risk aversion, with focus on the meeting of U.S.
rate-setters later in the day.
Some better-than-expected economic data and corporate
earnings results this week have encouraged investors to adjust
some of their extreme risk averse positions, although they
remain mindful that the global economy is still in deep trouble.
European shares .FTEU3 gained 1.7 percent, boosted by an
ongoing recovery in recently battered banking stocks.
Currencies such as the euro and the pound that have suffered
during bouts of heightened risk aversion gained, at the expense
of the dollar and the yen which are typically perceived as safe
"At the moment sentiment is likely to stay slightly negative
for the dollar and the yen, partly because we are still in the
honeymoon period for Obama," Standard Bank G10 currency
strategist Steve Barrow said.
"But I don't see these declines as durable," he added.
At 1044 GMT, the euro rose 0.6 percent against the dollar
<EUR=> to $1.3250 and by 0.9 percent versus the yen <EURJPY=R>
to 118.30 yen. The dollar also gained 0.3 percent against the
yen <JPY=> to 89.20 yen.
The pound <GBP=> continued to recover versus the dollar
after its slump to a 23-year low last week, hitting a one-week
high of around $1.4325. The euro lost 0.4 percent against
sterling <EURGBP=> to 92.77 pence.
The conclusion to the Fed's two-day meeting later in the day
will provide the main focus for currency markets, although
policymakers have run out of interest rate ammunition with the
benchmark rate already targeted at zero to 0.25 percent.
The market will be looking for any announcement of new
policy measures, such as purchasing long-dated Treasuries.
ECONOMIC CONCERNS REMAIN
Investors were taking heart from positive signs on U.S.
President Barack Obama's planned $825 billion stimulus plan to
stem the recession in the U.S., with Democrats hopeful they have
enough votes to push it through [ID:nLS502975].
Analysts said this was helping to ease risk aversion,
alongside market talk that the U.S. will set up a "bad bank" to
mop up toxic assets.
But they warned that the global economic outlook remained
bleak and that the more positive sentiment seen this week could
"Global growth and demand are still the key and confidence
is shot," IDEAGlobal strategist Maurice Pomery said in a note to
"The bigger themes remain and I still believe the dollar
will do well and yen strength with continue".
The Swiss franc fell to its lowest level so far this year
against the euro after the key KOF economic barometer on
Switzerland fell to its lowest since the series began in 1991
[nCHKOF]. The euro hit a high of around 1.5156 Swiss francs
Meanwhile, data out of Australia overnight showed consumer
prices fell by their biggest amount in a decade during the
fourth quarter, justifying talk of another aggressive interest
rate cut next week. [ID:nSYD216950].
The Australian dollar initially dipped after the data, but
the higher-yielding currency later recovered, helped by the
pick-up in equities. It was last trading up 0.6 percent versus
the U.S. dollar at $0.6660 <AUD=>.
The New Zealand dollar fell, however, ahead of a Reserve
Bank of New Zealand rate decision overnight, where analysts
expect a large rate cut, possibly of 100 basis points, from the
current level of 5.00 percent.
The currency dropped 0.7 percent against its U.S.
counterpart to $0.5260 <NZD=>.
(Reporting by Jessica Mortimer; Editing by Toby Chopra)
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