Thursday January 29, 2009 - 11:35:11 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar, yen supported as risk appetite retreats
* Dollar, yen supported as risk appetite fades
* Euro down 0.6 pct at $1.3065 <EUR=>; down 1 pct vs yen
* Euro zone sentiment index dn but higher than expected
* NZ dlr hits 6-yr low on bigger-than-expected rate cut
(Adds quote, update prices)
By Tamawa Desai
LONDON, Jan 29 (Reuters) - The dollar and yen were broadly
supported on Thursday as fading optimism over the latest U.S.
monetary and fiscal stimulus measures prompted investors to seek
perceived safer assets as share prices fell.
The euro remained under pressure, reversing a trend seen
earlier in the week where it had benefited as concerns about the
banking system and economy eased.
Also weighing on the euro were comments by European Central
Bank President Jean-Claude Trichet, who told CNN that the
central bank could cut key euro zone rate below the current two
percent as well as more unconventional measures. [ID:nWEA3959]
The euro pared some losses after data showed euro zone
sentiment indexes came in somewhat higher than expected,
although they were at record lows in January.
Euro zone economic sentiment fell to 68.9 in January, higher
than forecasts of 65.8 but still the lowest since records began
in 1985. It came after an upwardly revised 70.4 in December.
"The pace of deterioration seems to have levelled off a bit,
which is a good sign," said Dominic Bryant, economist at BNP
Paribas. "We still expect the euro zone economy to continue
At 1030 GMT, the euro was down 0.6 percent at $1.3065 after
hitting a session low of $1.3029 <EUR=>. Against the yen, it was
down 1.0 percent at 117.47 yen <EURJPY=R>.
The dollar and yen have been viewed as a safe-haven currency
amid the global financial crisis, and it often fluctuates
depending on perceived shifts in investors' tolerance for risk.
Currencies have also been closely tracking moves in equity
markets, with lower share prices feeding into risk aversion.
European shares were down 1.2 percent by late morning trade
.FTEU3, and U.S. S&P futures were also down 1.3 percent SPc1
after U.S. equity markets surged on Wednesday, also in part on
speculation the Obama administration would set up a so-called
"bad bank" to relieve banks of toxic assets.
The Fed kept interest rates near zero on Wednesday after a
two-day policy meeting as widely expected, and said it was
prepared to buy long-term Treasury debt if that would help
improve credit conditions. [ID:nN28496147]
Although that indicated a step forward for the Fed to buy
Treasuries, markets were disappointed as it was not likely to
Separately, U.S. President Barack Obama scored his first
legislative victory with passage of an $825 billion economic
stimulus package but every Republican who voted opposed the
"After the FOMC, risk appetite disappeared on disappointment
that the Fed did not decide to purchase long-dated Treasuries
immediately, and also on worries that the stimulus package may
not pass as cleanly as people had hoped," said Christian
Lawrence, currency strategist at RBC Capital Markets.
"We are seeing a reduction of risk appetite which benefits
the dollar and yen for its perceived safe-haven credentials."
Sterling reversed early losses on a large order to sell euro
for the pound. The pound was last at $1.4232 <GBP=>
The dollar slipped 0.5 percent to 89.86 yen <JPY=> from a
one-week high of 90.79 yen hit on trading platform EBS on
Wednesday following the Fed's decision.
Meanwhile, the New Zealand dollar fell to around $0.5127
<NZD=D4>, the lowest since December 2002 on Reuters data, after
New Zealand's central bank slashed interest rates by 150 basis
points to a record low of 3.5 percent, and left the door open
for further, smaller cuts. [ID:nWEL285828]
(Editing by Andy Bruce)
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