Tuesday March 10, 2009 - 10:11:36 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar falters, sterling stays on defensive vs euro
* Dollar stalled as investors look to U.S. stock futures
* Sterling extends loss vs euro; outlook wobbly
* Bini Smaghi comments sap some euro strength
* Yen erases earlier losses to rise vs dollar
(Changes dateline, byline, adds quotes, updates prices)
By Veronica Brown
LONDON, March 10 (Reuters) - The dollar fell against a
basket of currencies on Tuesday, retracing much of the previous
day's sharp gains as investors focused on U.S. stock market
futures that pointed to a stronger start for Wall Street.
A tentative easing of wariness towards risk allowed the euro
a technical bounce against the dollar, while sterling lengthened
losses versus the common currency on continued worries about
Britain's banking sector.
The yen erased losses and rose versus the dollar, though
doubts about its status as a safe port in the global economic
storm ensured it kept an overall defensive tone, traders said.
"The euro seems a bit stronger against most currencies
today, particularly against the dollar, probably on expectations
of positive U.S. stock markets," John Hydeskov, senior FX
analyst at Danske Bank in Copenhagen.
The dollar index, a gauge of its performance against six
major currencies, fell 0.9 percent to 88.492 .DXY, off last
week's three-year high of 89.624.
The euro rose 0.8 percent to $1.2712 <EUR=>, rebounding from
a three-month low of $1.2457 hit last week. The euro was also
firmer against sterling at 91.73 pence <EURGBP=>, off a 5-1/2
week high of 92.18 pence.
U.S. stock market futures SPc1 DJc1 pointed to a
stronger Wall Street open. Citigroup shares (C.N: Quote, Profile, Research, Stock Buzz) were in focus
after a memo from Chief Executive Vikram Pandit obtained by
Reuters said it was profitable in the first two months of 2009
and confident about its capital strength. [nLA390055]
The euro's gains versus the dollar were dented slightly
after ECB Executive Board member Lorenzo Bini Smaghi was quoted
as saying the bank was prepared to cut interest rates to zero if
deflation threatens and the economic situation worsens.
"The comments are dovish, but they continue to put some
distance between themselves and any possible quantitative easing
... They continue to dismiss an outright ECB intervention in the
bond market," said Richard McGuire, fixed income strategist at
RBC Capital Markets in London.
The pound managed to recover from a six-week low against the
dollar, rising 0.7 percent on the day to $1.3824 <GBP=D4>.
But the rebound was on shaky ground after it shed 2 percent
on Monday when banking sector worries intensified as Lloyds
Banking Group (LLOY.L: Quote, Profile, Research, Stock Buzz) said the British government was taking a
stake in it of up to 77 percent.
Pressure from the Bank of England's quantitative easing
programme was also reflected in bond markets as the yield on
benchmark 10 year gilts fell below 3 percent for the first time
in more than 50 years on Monday.
"We are in a situation where sterling is perceived as a weak
currency, with economic news regularly confirming a pessimistic
view on the UK as an economy that is struggling," said Chris
Gothard, currency strategist at Brown Brothers Harriman in
The yen reversed earlier losses against the dollar to rise
0.3 percent to 98.45 yen, but stayed weaker versus a broadly
stronger euro at 125.09 yen <EURJPY=>.
The Japanese unit has fallen in the past month as Japan's
economy grapples with diving exports and its worst recession of
the postwar era.
The current account balance swung to its largest deficit on
record in January, adding to selling pressure.
Market participants say foreign investors have been reducing
long positions in the yen, with expectations fading that it can
surpass a 13-year peak of 87.10 yen per dollar hit in January.
Recessions in many of Japan's export markets have dried up
overseas demand for its goods, meaning exporters also have fewer
dollars to sell in exchange for yen, traders say.
(Additional reporting by Jessica Mortimer and Naomi Tajitsu
(Reporting by Veronica Brown; Editing by David Stamp)
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