Wednesday February 18, 2009 - 10:55:37 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro pares gains vs dlr; stg down as QE looms
* Euro pares early gains vs dlr on bank, econ woes
* Euro down 0.2 pct at $1.2564 after hitting low of $1.2558
* Sterling down as BoE minutes show unanimous vote for QE
(Adds quote, updates prices)
By Tamawa Desai
LONDON, Feb 18 (Reuters) - The euro pared early gains on
Wednesday, as concerns about the banking system and economy cut
short a technical rebound after the single currency hit 2-1/2
month lows against the dollar.
Sterling fell broadly as minutes from the Bank of England's
February rate-setting meeting showed policymakers voted
unanimously to seek government consent for so-called
"quantitative easing" though buying gilts and other securities.
The euro was down 0.2 percent at $1.2564 <EUR=> after rising
as high as $1.2639, according to Reuters data. It had fallen to
$1.2558 on trading platform EBS, its lowest since Dec. 4. It was
flat at 116.18 yen <EURJPY=R>.
"The risks are still heavily to the downside for the euro,"
said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi
Sentiment remained weak for the euro as banks continued to
be crippled by soured assets and a global economic downturn
showed no real sign of recovery.
By 0959, sterling was down 0.6 percent at $1.4145 <GBP=>
after hitting a low of $1.4094. The euro was up 0.7 percent at
"I think it's very likely that we see measures in place by
the March meeting for (the BoE) to undertake quantitative
easing, especially given what was said this time round," said
George Buckley, chief UK economist at Deutsche Bank.
France's Societe Generale (SOGN.PA: Quote, Profile, Research, Stock Buzz) said on Wednesday it had
eked out a small profit for the fourth quarter, compared with a
big year-ago loss when it was hit by a rogue trading scandal,
while ING (ING.AS: Quote, Profile, Research, Stock Buzz) of the Netherlands and Germany's Commerzbank
(CBKG.DE: Quote, Profile, Research, Stock Buzz) reported losses. [ID:nLI247678]
That put pressure on European shares, which were down 1.2
percent in morning trade. .FTEU3
The euro also remained under pressure after Moody's
Investors Service had threatened to downgrade euro zone banks
with significant exposure to the weakening economies in Eastern
and Central Europe, and Standard & Poor's said it may review
emerging Europe bank ratings. [ID:nLH423223]
YEN LOSING LUSTRE?
The dollar was up 0.2 percent at 92.57 yen <JPY=> after
rising to a more than one-month high of 92.75 yen on Tuesday.
Some analysts said the yen may be losing its lustre as a
perceived "safe-haven" currency as investors became more wary
after a steep contraction in Japan's economy.
"We are becoming increasingly worried that the slowdown in
Japan is becoming so severe and the current account surplus is
narrowing so quickly that the yen is no longer seen as a
defensive play in times of crisis," said Chris Turner, head of
forex strategy at ING.
Japan's economy shrank a stunning 3.3 percent in the Oct-Dec
quarter of 2008 from the previous three months, or an annualised
minus 12.7 percent.
The Bank of Japan will announce its rate decision after a
two-day meeting concluding on Thursday, where it is expected to
keep key interest rates at 0.1 percent but possible expand on
further steps of buying assets to bolster demand.
Analysts seem to agree the dollar will be in favour in the
near term, especially as a global economic slump continues.
Traders will watch U.S. housing starts data and industrial
production figures later in the day, which are expected to
reinforce the economic downturn. A recovery in the U.S. housing
sector is seen critical for any broader economic rebound.
Also on Wednesday, U.S. Federal Reserve Chairman Ben
Bernanke is scheduled to speak on the central bank's lending
programmes and its balance sheet, while minutes from the Fed's
January rate-setting meeting will be released.
Data on Tuesday showed foreigners bought a net $34.8 billion
in long-term U.S. securities in December, reversing outflows in
the prior month. That was tied to so-called safe-haven flows,
(Reporting by Tamawa Desai; Editing by Andy Bruce)
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