Monday March 23, 2009 - 09:38:38 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dlr falls as toxic asset plan boosts sentiment
* Dlr continues to sag as U.S. toxic asset plan eyed
* Yen hits 5-mth low vs euro, 2-1/2 mth lows vs Aussie, kiwi
* ECB's Trichet: cenbank reluctant for rates to fall to zero
* U.S. to put in $75 bln-$100 bln into toxic asset programme
(Changes byline, dateline (previous Tokyo) recasts, updates
quotes and prices)
By Kirsten Donovan
LONDON, March 23 (Reuters) - The dollar continued to sag on
Monday as risk appetite improved on a U.S. plan to remove toxic
assets from bank balance sheets after details of the scheme were
The Federal Reserve's plan to purchase longer-term
Treasuries, which was announced last week, also continued to
weigh on the greenback on concerns that the policy could lead to
an oversupply in the world's main reserve currency.
Stock markets around Asia rose and European bourses opened
higher as investors eyed plans by Treasury Secretary Timothy
Geithner to purge U.S. banks of "toxic" assets.
Geithner is set to speak at 1245 GMT but a U.S. official
gave details of the plan beforehand, saying the government would
put in $75 billion to $100 billion from its bailout fund to
partner with private investors and buy troubled assets at the
heart of the financial crisis. [ID:nWEQ000809] [ID:nSP424881]
"Stocks are opening up so risk appetite is on the up, it
seems Geithner has managed to instill a positive note in terms
of the broad market this morning," said Rabobank strategist
"However, we need to hesitate because there are still some
gaps in the details...but for now markets are buying into the
risk recovery story...and that's a short-term negative for the
The dollar fell against a basket of currencies .DXY to
83.3, with investors continuing to favour currencies whose
central banks had interest rates above zero and look unlikely
use quantitative easing to get their economies moving, such as
the euro, Australian dollar and Norwegian crown.
However, the pound also got a lift early on Monday due to
the dollar's broader weakness.
The yen also slipped, falling to its lowest in five months
versus the euro, and dropping more than 1 percent against
The euro <EUR=> rose 0.4 percent to $1.3644, after hitting a
2-1/2 month high at $1.3739 on EBS last week, while the pound
GBP gained 0.77 percent to $1.4578. The Aussie dollar <AUD=>
was the biggest gainer against the U.S. currency, up 1.54
percent at $0.6971, having hit a 2-1/2 month high of $0.7003.
Against the yen, the euro rose 1 percent to 131.54 yen
<EURJPY=R>. Earlier, it hit its highest since late October at
131.99 yen. Japan's markets were shut on Friday for a national
The yen's broad slide lifted the Australian dollar to a
2-1/2 month high at 67.29 yen <AUDJPY=R> and the New Zealand
dollar up a similar amount to 54.51 yen, having also hit 2-1/2
months highs earlier.
ECB WARY OF ZERO RATES
European Central Bank chief Jean-Claude Trichet signalled
that the central bank remained wary of interest rates falling to
zero in a newspaper interview published on Monday, in contrast
with the U.S. and Japan, where rates are already almost zero.
Trichet said the ECB could cut rates further, from a record
low of 1.5 percent, but there were drawbacks with policy rates
at zero and the central bank did not think it would be
The ECB has become increasingly isolated among major central
banks as it has not moved beyond interest rate cuts to forms of
quantitative easing to boost the recession-hit region.
The Bank of England has already begun buying government
bonds to pump money into the system and the Bank of Japan last
week raised the amount of government bonds it plans to buy.
The Fed's decision last week saw the dollar notch up its
steepest weekly fall since 1985 against the basket of
"The question is whether the QE measures announced by the
Fed last week and the toxic asset plan to be revealed today will
be perceived by markets as having a significant chance of
success," Barclays Capital strategists said in a note.
The Fed's move into QE is targeted at lowering all rates to
avert deflation and stimulate the economy. It is also aimed at
making it less profitable to hold cash and Treasuries,
pressuring investors to put money into riskier but
higher-yielding assets such as corporate bonds.
The U.S. Treasury will auction close to $100 billion of new
Treasuries this week.
"This will be the first test of the Fed's ability to keep
Treasury prices supported, against a backdrop of rising
supply... For the dollar, the level of participation by foreign
investors, as reflected in the indirect bid, will be of
particular interest," Barclays said.
The dollar firmed 0.4 percent to 96.25 yen <JPY=>, but was
still well down from a four-month high of 99.69 hit earlier in
March. It dropped to a one-month low of 93.55 last week.
(Reporting by Kirsten Donovan; Editing by Toby Chopra)
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