Wednesday February 25, 2009 - 21:14:20 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar gains broadly as risk aversion remains high
* Dollar advances against most majors on safe-haven bid
* Risk aversion high despite Obama's optimistic tone
* Lower U.S. housing sales help dollar's safe-haven appeal
(Adds details; updates prices)
By Vivianne Rodrigues
NEW YORK, Feb 25 (Reuters) - The dollar strengthened on
Wednesday as weak U.S. housing data and concerns about the
global economy boosted the greenback's appeal as a safe haven
despite President Barack Obama sounding a more optimistic tone.
Late on Tuesday, Obama tried to reassure Americans in an
address to Congress that the country would emerge stronger from
the financial crisis. But analysts said he shed little light on
how his administration would stabilize the economy. For
details, see [ID:nN24394594]
Data showing the pace of existing U.S. home sales fell 5.3
percent in January weighed on stocks and triggered more dollar
buying against the euro. [ID:nN25480109] Stocks pared losses
late in the session.
The negative housing data "have rekindled the demand for
safe-haven dollar assets," said Omer Esiner, senior market
analyst at Ruesch International in Washington.
Esiner noted the dollar rose to session highs against the
euro, sterling, Canadian dollar <CAD=> and other major
counterparts after the release of the data.
In late afternoon trading in New York, the euro was down
0.8 percent at $1.2735 <EUR=>, after earlier touching a session
low of $1.2691. Sterling <GBP=> traded 1.7 percent lower at
Obama's address to Congress followed Capitol Hill testimony
by Federal Reserve Chairman Ben Bernanke on Tuesday in which he
said the significant value built up in the country's banks
would be lost if the government owned them, easing investor
fears that the banks would be nationalized.
Bernanke's prepared testimony to the House Financial
Services Committee on Wednesday was identical to the previous
The dollar has been in demand as one of the last safe-haven
currencies at a time of global economic uncertainty and risk
aversion even as the U.S. suffers its own economic problems.
Any optimism that the global economy could be recovering,
however, should prompt investors to sell the dollar and buy
riskier assets and currencies.
"When panic and risk aversion abate, money will start
flowing into other regions such as Europe," said Axel Merk,
portfolio manager of the California-based Merk Hard Currency
Merk added he expects the dollar to fall sharply once
demand for Treasury and agency debt eases and as the U.S.
current account deficit swells.
WEAK EUROPEAN DATA
Still, data in Europe on Wednesday showed Germany's economy
contracted by a record 2.1 percent in the fourth quarter,
dragged down by foreign trade. [ID:nLP346789]
Separately, revised data showed Britain's economy shrank an
unrevised 1.5 percent in the three months to December.
For now, "the euro continues to be weighed down by problems
in the euro zone," said Marc Chandler, global head of currency
strategy at Brown Brothers Harriman in New York, in a note to
The yen, which had been one of the few other bright spots
in foreign exchange markets on Wednesday, reversed direction
and fell against the dollar as the New York session progressed.
The dollar was last up 0.8 percent against the yen at 97.54
"There are a number of themes running through the market
and it just depends on which is being focused on," said John
McCarthy, director of foreign exchange at ING Capital Markets
in New York. "You look at the data out of Japan and they have
some serious problems."
Japan's exports nearly halved in January from a year
earlier, with record slides in shipments to the United States,
Europe and the rest of Asia pointing to a deepening recession
across much of the world. [ID:nSP389451]
(Additional reporting by Nick Olivari and Wanfeng Zhou;
editing by Diane Craft)
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