Friday February 27, 2009 - 11:21:57 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dlr index hits 3-mth high; yen snaps losses
* Dollar hits 3-month high vs basket of currencies .DXY
* Yen rebounds vs dollar, euro; month-end flow supports
* European stocks lurch lower; banking sector weighs
* Japan industry output down 10% in January
By Veronica Brown
LONDON, Feb 27 (Reuters) - The dollar rallied sharply on
Friday, hitting a three-month high versus a basket of
currencies, taking a lead from faltering European stock markets
as banking sector worries returned to stalk investors.
Bank shares fell sharply, led by Lloyds Banking Group
(LLOY.L: Quote, Profile, Research, Stock Buzz) after a 2008 statutory loss of 10.8 billion pounds
($15.4 billion). The bank also said it was in talks to place
billions of pounds of assets into a UK-government backed
insurance scheme [ID:nLR106223].
The yen gained sharply, snapping a string of losses that
took it to three-month lows this week against the dollar, with
dealers citing month-end flows even as Japanese industrial
output data continued to paint a bleak picture of the economy.
"We have a reasonably straightforward link between the
currencies and the vagaries of the equity markets and risk
appetite," said Daragh Mayer, deputy head of FX research at
Calyon in London.
"We've had some pretty weak numbers out of the United States
which keeps risk aversion high and the dollar well supported,"
U.S. data on Thursday showed sales of newly built
single-family homes slumped in January to the lowest since at
least 1963. [ID:nN25500413] Other reports showed U.S. durable
goods orders fell for a sixth consecutive month to a six-year
low in January.
By 1036 GMT, the dollar was up 0.4 percent on the day at
88.168 .DXY, having earlier hit a three month high of 88.328.
The euro fell half a percent to $1.2667 <EUR=>, while yen
strength pulled the single currency down 1.4 percent to 123.45
Elsewhere, the Swedish crown tumbled to a record low against
the euro <EURSEK=> after data showed the Swedish economy
contracted more than twice as much as forecast in the fourth
YEN OFF LOWS
Sentiment towards the euro was also undermined by stock
market losses as investors shrugged off news that global
development banks had launched a coordinated plan to lend up to
25 billion euros to shore up banks in crisis-hit eastern Europe.
"It is a step in the right direction, but the amount is
small. Concerns about the adverse effect of Eastern European
economies on Western Europe banks continue to weigh on the
euro," said Adarsh Sinha, currency strategist at Barclays
The dollar lost 0.9 percent to 97.48 yen -- taking it
further away from three month highs hit the previous day at
98.70 according to Reuters data <EUR=>.
On a monthly basis the dollar is on course for a rise of
nearly 9 percent on the yen, its biggest monthly gain in
percentage terms since 1995.
But Japanese data continued to paint a gloomy picture of the
economy, dampening prospects of a sustained yen rebound.
Japanese industrial production plunged 10.0 percent in
January from the previous month, posting its biggest drop on
record and underscoring the sombre outlook that has helped drive
the yen lower in the past couple of weeks. [ID:nT68873]
Dealers said the data did little to change views that the
yen would resume its slide once profit-taking and month-end
selling by Japanese exporters, to benefit from the favourable
exchange rates, had worked its way through.
The yen has fallen nearly 11 percent against the dollar
since hitting a 13-year high of 87.10 yen in January, with the
slide steepening after poor GDP numbers last week and the
resignation of the finance minister after he was forced to deny
being drunk at a G7 meeting.
(Additional reporting by Tamawa Desai in London; Reporting
by Veronica Brown and Farah Master; Editing by Ruth Pitchford)
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