FOREX NEWS-Dollar broadly higher as ECB, BOE rate decisions loom
Wed Feb 4, 2009 4:30pm EST
* Dollar up as stocks fall, uncertainty over stimulus bill
* Russia's downgrade weighs on euro
* ECB, BOE rate decisions, U.S. jobs report in focus (Recasts; adds comments, updates prices, changes byline)
By Wanfeng Zhou
NEW YORK, Feb 4 (Reuters) - The U.S. dollar rose across the board on Wednesday as falling stock prices and concerns over possible delays in the government's stimulus package boosted the greenback's safe-haven appeal.
The euro sank against both the dollar and the yen, weighed by news of a downgrade of Russia's sovereign credit rating.
"The short-term market is moving in lockstep with risk appetite," said Vassili Serebriakov, currency strategist at Wells Fargo in New York. "There were some questions about the stimulus package going through the Senate."
Concerns about continued deterioration in the global economy overshadowed earlier data showing U.S. private sector job losses slowed slightly in January while service sector activity shrank less severely than expected. For details, see [ID:nN04279497]
In late New York trading, the dollar rose 0.8 percent to 85.697 against a basket of currencies .DXY.
The euro fell 1.4 percent to $1.2848 <EUR=> and 1.3 percent to 114.87 yen <EURJPY=>. The dollar rose 0.2 percent to 89.41 yen <JPY=>.
Investor risk sentiment remained subdued and Wall Street stocks fell amid uncertainty over the Obama's administration's plan to revive the economy and banks.
The Senate entered a third day of debate on Wednesday and Democrats worked to revise their $900 billion stimulus bill, hoping to drum up enough Republican support. [ID:nN04304002]
U.S. Treasury Secretary Timothy Geithner said he will reveal next week detailed plans for reinvigorating a slumping U.S. economy and getting credit flowing again.
Price action during the North American trading session was limited as many investors stayed on the sidelines ahead of central bank meetings on Thursday and Friday's key U.S. nonfarm payrolls report.
"The market is still waiting for decisive data points, which could come Friday," said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.
RUSSIA, ECB EYED
The euro came under heavy pressure after Fitch Ratings downgraded Russia's sovereign credit ratings to 'BBB' and said more cuts were possible due to low commodity prices, dwindling reserves and corporate debt problems. [ID:nL4753745]
This has sparked concerns a sharp downturn in Eastern Europe could hit the euro zone economy hard.
Also weighing on the euro was Kazakhstan's central bank's decision to devalue the Central Asian country's tenge currency <KZT=> by about 18 percent and allow it to fall to around 150 per dollar.
The Russian sovereign downgrade and Kazakhstan's devaluation "has put CEE (Central and Eastern European) currencies back under pressure," BNP Paribas wrote in a research note.
"CEE economies are highly dependent on external funding which implies that if Western European banks reduce their provisioning to the CEE, it will ultimately come to hurt Europe and in turn the euro," it added.
Analysts also noted that as outflows from Russia have put pressure on the ruble, Russian authorities have to sell euros to maintain the balance of their reserves portfolio, further weighing on the single currency.
Data released earlier showed deterioration in the euro zone's dominant services sector slowed slightly in January, but separate numbers showed euro zone retail sales fell more than expected year-on-year in December.
The European Central Bank meets on Thursday when it is widely expected to leave interest rates unchanged at 2 percent. The Bank of England is expected to cut rates to a fresh record low of 1 percent from 1.5 percent also on Thursday. (Additional reporting by Vivianne Rodrigues; editing by Gary Crosse)
Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests.
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