Monday April 6, 2009 - 20:49:45 GMT
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Reuters - www.reuters.com
FOREX NEWS-US dollar advances broadly as global stocks fall
* U.S. dollar rises above 101 yen, highest since Oct 2008
* Drop in stocks rekindles risk aversion
* Soros says US dollar may be replaced as reserve currency
(Adds comments, details, updates prices)
By Vivianne Rodrigues
NEW YORK, April 6 (Reuters) - The U.S. dollar rose broadly
on Monday, as stocks in Europe and on Wall Street fell on
fading optimism about a global economic recovery, prompting
investors to buy the greenback as a safe haven.
The yen fell earlier to a nearly six-month low versus both
the dollar and the euro, with investors selling the Japanese
currency in response to a rise in global stocks, particularly
the Nikkei index. But as equities fell, the yen trimmed losses
versus the dollar and turned higher against the euro.
"When equities move up, euro/dollar goes higher, and when
stocks move down, euro/dollar goes lower," said Greg Salvaggio,
senior vice president for capital markets at Tempus Consulting
in Washington. "But the dollar's gains versus the euro are
nothing to get excited about. The euro is consolidating between
$1.31 to $1.36."
Salvaggio said the euro/dollar pair will keep range trading
until there is evidence that the global economy has bottomed.
"We will have to see three or four months of data to judge
whether the worst is behind us," he said.
In late afternoon trading in New York, the euro fell 0.6
percent versus the dollar to $1.3399 <EUR=>. The ICE Futures'
dollar index, a gauge of the dollar's value against six major
currencies, was 0.7 percent higher at 84.73 .DXY.
Demand for dollars tends to rise in response to bad news
because investors view it as the safest store of value at a
time when economies around the world are contracting.
The dollar rose earlier to 101.45 yen <JPY=>, the highest
level since October 2008, according to Reuters data. It last
traded at 100.97, up 0.7 percent on the day.
The move above 101.00 yen was considered technically
significant by some analysts but Barclays Capital said in a
note the dollar and the yen are likely to trade within a 95 to
100 range. Still they added, any moves in the spot exchange
rate, such as today's break above this range, "provide
opportunities" for investors to sell on rallies.
FX MARKET VULNERABLE
The euro <EURJPY=R> was little changed against the yen at
135.32 but earlier it rose to 137.43, its strongest in more
than five months. Sterling slid against the dollar, erasing
earlier gains that had propelled it to a two-month high against
the U.S. currency. The pound, which is also highly sensitive to
equity market moves and investor sentiment along with the euro,
was last at $1.4725 <GBP=>, down 0.7 percent.
Analysts said the market remained vulnerable to swings in
risk appetite and warned it may be premature to assume that the
worst of the global credit crisis was over after U.S. stocks
.DJI rallied last month.
The recent rally in both equities and currencies has been
fueled more by faith than fact, Boris Schlossberg, director of
currency research at GFT Forex, said in a note.
"It is difficult to imagine how the four-week rally could
maintain this type of pace against the current fundamental
backdrop," he added. As the week progresses, Schlossberg says
equities are likely to correct, taking risk currencies down
Adding to the dollar's safe-haven allure were comments by
billionaire investor George Soros that the U.S. economy is in
for "a lasting slowdown" and won't recover this year. He also
said "the banking system as a whole is basically insolvent."
But Soros also told Reuters Financial Television the U.S.
dollar may eventually be replaced as world reserve currency,
possibly by the International Monetary Fund's Special Drawing
Rights. For story click on [ID:nN06386461].
Investors now are turning their attention to the few U.S.
economic highlights of the week, with reports on trade,
wholesale inventories and import prices still due. The Federal
Reserve is also going to release minutes of its March interest
(Additional reporting by Gertrude Chavez-Dreyfuss; Editing by
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