Monday March 9, 2009 - 11:04:43 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar gains broadly as stocks fall on banking woes
* Dollar rises broadly as equities fall sharply
* European shares lose 1.7 pct, led by banking stocks
* Sterling badly hit by equity falls, hits 6-wk low vs dlr
* Yen falls as Japan posts current account deficit in Jan
(Updates prices, adds quotes)
By Jessica Mortimer
LONDON, March 9 (Reuters) - The dollar rose broadly on
Monday as global recession fears and banking sector concerns
pulled shares lower and encouraged investors to move back into
the perceived safety of the U.S. currency.
Falls in banking shares pushed the pan-European FTSEurofirst
300 index .FTEU3 down 1.7 percent, while the broader STOXX 600
index fell to its lowest since September 1996.
Concerns about the outlook for the banking sector
intensified after Lloyds (LLOY.L: Quote, Profile, Research, Stock Buzz) said over the weekend that the
UK government would get a stake of up to 77 percent in the bank
after agreeing to underwrite 260 billion pounds of risky assets.
The dollar benefitted broadly from the falls in share
markets, particularly against sterling, which dropped to a
six-week low given the focus on troubles with UK banks.
Meanwhile, global recession fears also gripped markets after
Japan swung to its first current account deficit in 13 years
[ID:nT250938] and investors continued to digest Friday's grim
U.S. jobs data which brought the unemployment rate to a 25-year
high in February [ID:nN06382576].
"There is not much in the way of good news out there, and
there are no signs of the dollar losing its safe haven status,"
UBS currency analyst Geoffrey Yu said.
"We are seeing a broad correction from the pre-payroll
losses in the dollar, with the data showing that the U.S.
economy is still in slow bleed mode," he said.
At 1041 GMT, the dollar index rose 0.5 percent to 89.011
.DXY as the euro fell 0.3 percent to $1.2605.
The dollar's biggest gains came against sterling, which fell
over 1 percent to hit a near six-week trough of $1.3909 <GBP=>,
with analysts noting a particularly strong link between the UK
currency and equity market developments.
Other currencies perceived to be higher risk also fell
sharply against the U.S. currency, with the Australian dollar
<AUD=> down 0.7 percent at $0.6360 and the New Zealand dollar
<NZD=> falling 0.8 percent to $0.4984.
The yen fell broadly after yet more grim data on the
Japanese economy, this time showing the first current account
deficit in 13 years in January as the global recession crushed
export demand and income from overseas investment [ID:nT181429].
A deepening downturn in Japan has taken the shine off the
Japanese currency's attraction as a safe-haven currency in
recent weeks, taking the dollar back within sight of the key 100
"The yen is likely to remain weak, particularly as we head
into the fiscal year-end, and since the Japanese authorities
have indicated that they want the currency to weaken," BNP
Paribas currency strategist Ian Stannard said.
The dollar rose 0.5 percent against the yen to 98.88 yen
<JPY=>, while the euro also gained 0.2 percent to 124.68
With little in the way of key economic data due for release
on Monday, analysts said market players will be wary of the
possibility of any more negative news on either the corporate or
the economic front which could intensify market risk aversion.
Earlier Monday, the latest Sentix indicator showed sentiment
among euro zone investors deteriorated in March to its lowest
level since the survey began in early 2003, dropping by more
than expected to -42.7 from -36.1 in February [ID:nBAF000831].
(Reporting by Jessica Mortimer; Editing by Victoria Main)
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