Wednesday February 25, 2009 - 11:10:16 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar erases losses vs euro; yen falls
* Dlr erases losses vs euro as risk rally looks shaky
* Yen weakens as safe-haven status continues to fade
* German, UK GDP data weak; Japan exports plunge in January
(Updates prices, adds quotes)
By Jessica Mortimer
LONDON, Feb 25 (Reuters) - The dollar erased earlier losses
against the euro on Wednesday as concern about the global
economy crept back in to boost the perceived safe haven
currency, while the yen continued to fall broadly.
The U.S. currency had started the day on the back foot
against the euro as equity markets took heart from Federal
Reserve chairman Ben Bernanke's signal that bank
nationalisations were not imminent.
But analysts said the rally in riskier assets, which also
bolstered currencies such as sterling and the Australian dollar,
was looking shaky, although European shares remained up 1.3
"The market is struggling for direction today and a lot will
depend on whether U.S. equities can hold on to gains," CMC
Markets analyst James Hughes said.
"The focus can easily switch back to how bad the situation
with the banking sector and the global economy is, and this
tends to lead to dollar strength," he said.
Meanwhile, the yen came off lows but remained weak, with the
dollar close to an earlier three-month high and the euro having
hit its highest in nearly seven weeks against the currency, as
Japanese economic woes undermined its safe haven status.
At 1054 GMT, the euro was down 0.1 percent at $1.2831
<EUR=>, below an earlier session high of $1.2901, while the
pound <GBP=> also erased gains to trade flat at $1.4474.
Against the yen, the dollar rose 0.1 percent to 96.89 yen,
not far off a three-month high of 97.35 yen hit earlier on
trading platform EBS. The euro was up 0.2 percent at 124.40 yen
<EURJPY=R>, off an earlier high of 125.18 yen.
Pressure on the yen increased overnight as figures showed
Japan's exports nearly halved in January from a year earlier,
giving more evidence that the economy is sliding into a deep
recession. See [ID:nT49636].
"People have been scaling back their long yen positions,"
Stockholm-based SEB foreign exchange strategist Johan Javeus
"Ultimately Japan is used to low growth but it is heavily
dependent on exports," he added.
Despite the improvement in risk sentiment evident on rising
stock markets, there was plenty to keep investors wary about the
grim outlook facing the global economy.
Bernanke gave some encouragement by saying on Tuesday that
he saw no reason to destroy the "franchise value" of major banks
by taking them into public ownership, but he also warned of a
severe U.S. downturn that could drag into next year.
Data released on Wednesday showed the British economy shrank
by an unrevised 1.5 percent in the last three months of 2008,
the sharpest drop since 1980, while figures for the third
quarter were revised down. [ID:nONS004083]
The news follows earlier evidence that the German economy
remains mired in a worsening downturn, with GDP falling 2.1
percent in the fourth quarter, dragged down by foreign trade.
There were also some negative comments from European Central
Bank governing council member Axel Weber, who said money markets
remain "tense" despite reduced volatility [ID:nLP86077].
Later in the day, investors will be watching out for the
release of U.S. existing home sales data.
(Reporting by Jessica Mortimer; editing by Chris Pizzey)
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