Wednesday March 25, 2009 - 12:06:38 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dlr reverses earlier gains; stg hit by data, gilts
* Dlr reverses earlier gains with Wall St seen higher
* Stg slides on failed gilt auction, retails sales data
* German corporate sentiment hits lowest level since 1990
(Updates prices and quotes, changes byline)
By Kirsten Donovan
LONDON, March 25 (Reuters) - The dollar reversed earlier
gains on Wednesday with Wall Street set to open higher, but
moves were capped as investors assessed whether the U.S. plan to
remove toxic assets from banks was enough to spur an economic
Sterling extended early broad losses to hit a session low
versus the dollar after data showing that retail sales fell more
sharply than expected in March and after a dismal UK gilt
The dollar -- which posted its biggest weekly fall last week
against a basket of major currencies since 1985 -- held close to
Tuesday's highs hit after Wall Street slid as investors paused
to weigh-up the likely success of the U.S. government's latest
plans to clean up bank balance sheets and revive the financial
European shares remained under pressure, but U.S. stock
market futures SPc1DJc1 pointed to a modestly higher open on
"People are asking if the bounce in stocks is over. The Dow
closing down yesterday has thrown a lot of people and there's
some uncertainty, people are waiting to see what the U.S. does
when it comes in," said Lee Ferridge, an FX Strategist at State
Street Global Markets.
The euro rose 0.3 percent against the dollar to $1.3503
<EUR=>, while the dollar index fell 0.1 percent to 84.029
Earlier, data showed German corporate sentiment deteriorated
to its lowest level since unification in 1990. The Munich-based
Ifo economic research institute said its business climate index,
based on a monthly poll of around 7,000 firms, fell to 82.1 from
82.6 in February [ID:nLP654170]
The pound took a pummelling after the Confederation of
British Industries distributive trades survey balance fell to
-44 in March from -25 in February. Analysts had expected a
smaller deterioration to -35.
The failure to achieve a fully covered gilt auction,
suggesting reduced demand for sterling assets, also weighed on
the currency [ID:nnLP456926].
Gilt strategists blamed the auction's failure on market
uncertainty created by Bank of England Governor Mervyn King when
he said on Tuesday that the BoE could scale back its programme
of gilt purchases if they were especially successful in boosting
"The gilt auction was appalling and at the next BoE meeting
they may have to extend the range of eligible maturities (for
quantitative easing)," said Christian Lawrence, FX strategist at
RBC Capital Markets.
"It has weighed on sterling at the margin but a large part
of what we're seeing is a correction of sterling's
outperformance over recent sessions, a bit of profit taking."
The pound fell 0.64 percent to $1.4581, while the euro rose
almost 1 percent to 92.55 pence.
The yen was supported by Japanese investors repatriating
funds from overseas before the end of the financial year on
March 31, traders said.
The dollar fell 0.1 percent to 97.64 yen <JPY=>, although
the euro was 0.14 percent higher at 131.74 yen.
Frankfurt-based Commerzbank currency strategist Ulrich
Leuchtmann said although there were no fundamental reasons to
buy the Japanese currency, there were concerns that its sharp
falls seen in February had been overdone, he added.
"Levels in dollar/yen just below 100 yen are providing
relatively strong resistance and are proving hard to break
through, so the yen has been going back and forth at the
In other news on Wednesday, Eurogroup head Jean-Claude
Juncker said Europe is not prepared to boost spending beyond
those stimulus measures it has already announced, even if
pressured to do so by the U.S. [ID:nLP219078].
--Additional reporting by Jessica Mortimer
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