Friday March 27, 2009 - 23:13:01 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar shines vs euro on U.S. stocks fall, ECB view
* Dollar gains vs euro as stocks weaken
* Euro slides on Steinbrueck's comments, weak data
* Euro posts biggest one-day slide vs dollar since Jan
(Adds comment, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, March 27 (Reuters) - The dollar rose on Friday,
posting its largest one-day gain against the euro in more than
two months, boosted by a growing view that the European Central
Bank may be the next to purchase its own bonds to stimulate
Weak U.S. stocks also drew safe-haven bids toward the
dollar compared with the single euro-zone currency. The
currency was further pressured by comments from German Finance
Minister Peer Steinbrueck suggesting fiscal irresponsibility in
Europe could put the euro at risk.
"U.S. equity markets are weak and that has helped the
dollar rally versus the euro; but in the background, people are
also thinking that the the ECB could potentially move toward
quantitative easing," said David Watt, senior currency
strategist at RBC Capital Markets in Toronto.
Several European officials over the past week have
indicated an openness to quantitative easing, or the process of
flooding the banking system with funds to promote lending when
interest rates are already at zero.
Watt said the the dollar's rally was a "general unwinding
of its sell-off" when the Federal Reserve announced last week
that it would buy long-term U.S. government debt.
In late afternoon trading, the euro was down 1.8 percent at
$1.3293 <EUR=> from an intraday high of $1.3591, according to
Reuters data. The euro posted its worst one-day performance
since Jan. 9.
The euro hit a weekly low of $1.3258, severely testing the
strength of long-term technical support at the 200-week moving
average of $1.3380. The currency was down 2.5 percent for the
week, its worst against the dollar since Jan. 25.
The yen, meanwhile, rallied broadly on flows related to
last-minute fund repatriation by investors in Japan ahead of
the annual book-closing on March 31.
The euro slid 2.6 percent against the yen to 130.13 yen
<EURJPY=>, while the dollar was down 0.8 percent at 97.910
The euro's decline was initially triggered by remarks from
Germany's Steinbrueck earlier in the session.
The finance minister said: "Germany, as a member of the EU,
has a massive interest in the credibility of the Stability and
Growth Pact, which, as you know, is not taken so seriously by
"If it is not taken seriously, I am telling you, the euro
will have trouble one day in terms of its own credibility and
stability," he told the German Parliament. For details, see
The euro was also weighed down by weaker-than-forecast euro
zone industrial orders and German inflation data. The reports
also fanned quantitative easing prospects at the ECB.
"The need for ... quantitative easing by the Fed recently
is slowly being seen as the necessary evil and likely to be
adopted across each G10 nation," said Andrew Wilkinson, market
analyst at Interactive Brokers in Greenwich, Connecticut.
"There should have been further follow-through euro buying
as the view became the new anti-dollar regime. But the fact was
there was none and as more up-to-date comments and data are
digested by the market, the euro is fast losing its luster," he
Sterling fell to a one-week low versus the dollar at
$1.4270, hurt by data showing the UK in the fourth quarter of
last year suffered the biggest contraction in economic growth
since 1980. [ID:nLR953228]
The pound was last down 0.8 percent at $1.4317 <GBP=>.
The dollar's broad gains were also supported by comments
from a senior Russian central bank official and the
International Monetary Fund's managing director that the dollar
will remain the world's reserve currency for some time.
These remarks cooled some of the fervor surrounding the
debate on the dollar's long-term standing as the top reserve
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