Wednesday March 11, 2009 - 12:12:12 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar loses traction on stock market rebound
* Dollar rally stubbed out as European shares claw up
* Euro/dlr approaches $1.2750/; euro/stg above 92 pence
* China export slump provides reminder of global uncertainty
* Sterling remains pressured as QE kicks off
(recasts, changes byline, adds quotes, updates prices)
By Veronica Brown
LONDON, March 11 (Reuters) - The dollar's early rally ran
out of steam on Wednesday, with a rise in European shares and
U.S. stock market futures dampening dollar supportive
risk-averse sentiment in FX markets.
Dollar losses versus some emerging market currencies were
also weighing on its progress against key major currency rivals,
European shares turned positive .FTEU3, with banks leading
the way as U.S. futures extended gains SPc1 DJc1. After an
early stumble, stocks were following Tuesday's rally on news
that Citigroup was profitable in the first two months of 2009
Sterling stayed under pressure against the single European
currency, hovering near 5-1/2 week lows as Britain officially
started its quantitative easing programme to boost money supply.
"The global risk aversion bid for the dollar may ebbing a
little bit with equity markets performing somewhat better," said
Robert Minikin, senior FX strategist at Standard Chartered in
"Dollar strength on the emerging crosses are also seeing a
significant correction and that's spilling over into the majors
too," he added.
The euro's gains were limited however as markets got a
timely reminder on the sickly state of global economic growth
after data earlier in the global session showed a slump in
economic powerhouse China's exports in February.
Data also showed German manufacturing orders fell by 8.0
percent on the month in January, posting their second biggest
decline since reunification in 1990. [ID:nLB315390]
The dollar fell 0.1 percent on the day against a basket of
six major currencies at 88.436 .DXY -- giving up an earlier
gain of 0.2 percent. It struck a three-year peak on the index
last week, at 89.624.
The euro rose 0.3 percent to $1.2714 <EUR=>, having touched
a two-week high of $1.2823 on trading platform EBS on Tuesday,
while the dollar was down 0.2 percent at 98.49 yen <JPY=>.
The Australian dollar reversed early losses to trade up 0.4
percent at $0.6477 <AUD=>.
In emerging markets, the Hungarian forint <EURHUF=> extended
gains from Tuesday versus the dollar to trade up at 1.14 per
cent while the Polish zloty <EURPLN=> rose 0.60 percent.
BOE LAUNCHES QE
Sterling stayed near multi-week lows versus the dollar and
euro on lingering concerns about the economy and banking system
as the Bank of England prepared to launch its 75 billion pound
asset-purchase programme, or quantitative easing.
The pound hit a six-week low against the dollar <GBP=> at
$1.3658 <GBP=>. The euro was around 5-1/2 week highs, holding
above the 92 pence mark <EURGBP=>.
The BoE will start pumping money into the economy on
Wednesday with a first purchase of 2 billion pounds of gilts.
Gilt futures have rallied nearly 7 full points since the BoE
first announced the scheme last week and cash yields have
plunged in the 5- to 25-year maturities the bank aims to buy.
But although many analysts think the scheme will ultimately
prove positive for the pound, sterling remains pressured in the
"While investors wait to see how QE helps the economy,
sterling should remain under pressure against the dollar but we
still look for relative sterling strength versus the euro amid
unresolved euro zone concerns and uncertainty regarding future
ECB policies," UBS strategist Gareth Berry said in a note.
(Additional reporting by Kirsten Donovan in London)
(Reporting by Veronica Brown; Editing by Andy Bruce)
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