Tuesday February 10, 2009 - 11:17:54 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar gains broadly, eyes on U.S. bank plan
* Dollar up on uncertainty ahead of U.S. bank plan
* Dollar index up 0.5 pct .DXY
* Euro hurt on report of Russia debt deal
* Geithner set to unveil bank plan outline at 1600 GMT
(Releads, adds quote, updates prices)
By Tamawa Desai
LONDON, Feb 10 (Reuters) - The dollar gained broadly on
Tuesday as investors sought the perceived safety of the U.S.
currency before the U.S. government announces the outline of a
widely anticipated plan to shore up its ailing banking sector.
The euro tumbled on conflicting reports that Russian banks
were seeking government help to restructure its foreign
But investors were generally wary of taking large positions
ahead of the U.S. plan, which will likely focus on helping banks
offload their so-called "toxic assets" and boost their capital.
U.S. Treasury Secretary Timothy Geithner is expected to unveil
the outline of the plan at 1600 GMT.
The Obama administration is also waiting for Congress to
work out an $800 billion-plus economic stimulus package,
although a major hurdle was cleared in the Senate on Monday.
"It feels like a generalised bout of dollar strength in part
still built by uncertainty over what happens with these U.S.
packages, and that's providing something of a safe-haven bid to
the dollar," said Daragh Maher, deputy head of global FX
research at Calyon.
"In general, the pattern we've seen in currencies after
announcements like these is euphoria that it's done and dusted
and then within 24 hours you have the assessment of the package
... and that tends to play for a bit of dollar strength."
The dollar rose against a basket of major currencies. At
0954 GMT, the dollar index .DXY was up 0.5 percent at 85.356.
The U.S unit was also higher against the Australian and New
Zealand dollars, up 2.1 percent <AUD=> and 1.2 percent <NZD=>,
The dollar was little changed against the yen, down 0.3
percent at 91.14 yen <JPY=>.
Earlier, the euro slipped more than one percent on the day
against the dollar and yen after Japan's Nikkei business daily
quoted Anatoly Aksakov, president of the Russian Association of
Regional Banks, as saying the industry group had submitted a
proposal to the Russian government to postpone loan repayments
of up to $400 billion in corporate debt owned to foreign banks.
But Russia was quick to play down the report.
"The government of the Russian Federation does not plan to
consider the issue of restructuring the corporate debt of
Russian banks and companies," Finance Minister Alexei Kudrin
told Reuters. [ID:nLA97570] Aksakov told Reuters the Nikkei
report was untrue. [ID:nLA444333]
"The Nikkei report soured sentiment toward the euro," said
Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ,
adding: "Broad concerns about Russia and emerging European
countries will continue to weigh heavily on the euro because of
European banks' exposure to those regions."
The euro was down 0.7 percent at $1.2917, after falling to
$1.2811 <EUR=>, according to Reuters data. Against the yen, the
euro was down 1.1 percent to 117.72 yen <EURJPY=R> after hitting
a low of 116.72 yen.
The euro was also pressured after European Central Bank
Governing Council member Axel Weber said on Tuesday that
concerns about long-term effects of loose monetary policies
should not stop central bankers from cutting interest rates
aggressively in the current severe downturn.
The ECB last left key interest rates unchanged at 2 percent
but is expected to cut rates again next month.
Data also showed weakness in the euro zone economy. Italian
industrial output was down 2.3 percent in December from the
previous month, or down 14.3 percent year-on-year.
The main focus, however, will be the U.S. financial
stabilisation and economic stimulus packages aimed at tackling
the recession in the world's biggest economy.
Three sources told Reuters the bank rescue package included
a public-private partnership that could buy up to $500 billion
worth of distressed assets, with private investors able to buy
bad assets through low-cost funding from the Fed or using
Federal Deposit Insurance Corp guarantees. [ID:nWEN4160]
(Additional reporting by Kirsten Donovan; editing by Stephen
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