Tuesday April 21, 2009 - 10:21:49 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro jumps after ZEW but econ jitters remain
* Euro jumps after rise in German ZEW index beats forecasts
* Euro hits session high of $1.2988 <EUR=>
* German ZEW sentiment index 13.0 in March
* Sweden's central bank cuts 50 bps, says rates to stay low
(Releads, adds quotes, update prices)
By Tamawa Desai
LONDON, April 21 (Reuters) - The euro jumped to a session
high against the dollar on Tuesday on a bigger-than-expected
improvement in German investor sentiment, after the pair hit a
one-month low the previous day.
But the euro's gains were limited as investors remain
cautious about the economy in spite of the survey, and of
corporate earnings announcements and the health of banks.
The Mannheim-based ZEW economic think tank's monthly poll of
economic sentiment rose to 13.0 from -3.5 in March. It was the
first time since July 2007 that the headline index was in
positive territory, and beat forecasts for a reading of 1.5.
That helped push the euro higher, which had gained somewhat
earlier in the global session as traders took profits from the
euro's recent slide.
"Today's ZEW index is good news. However, there is no reason
to become overly enthusiastic," said Carsten Brzeski, economist
at ING Financial Markets.
"Nevertheless, there are some glimmers of hope...The
deterioration of the real economy is slowing down and mixed
signals from confidence indicators show that at least confidence
is trying to find a bottom."
The euro hit a session high of $1.2988. It was last up 0.4
percent on the day at $1.2963 <EUR=> after the euro fell to a
one-month low of $1.2888 hit on trading platform EBS on Monday.
The single currency also rose to a session high against the
yen at 127.70 yen, up around 0.8 percent on the day <EURJPY=R>
That was after the euro hit a low of 126.10 yen on EBS.
The dollar was up 0.3 percent at 98.31 yen <JPY=>, up from a
three-week low of 97.66 yen hit on Monday.
The yen crosses and commodities currencies had taken the
brunt of the impact from a steep slide in U.S. equities on
Monday after Bank of America (BAC.N: Quote, Profile, Research, Stock Buzz) reported a jump in
non-performing assets, underscoring the banking sector's
The euro will likely remain under pressure by uncertainty
over what unconventional policy steps the European Central Bank
may adopt next month. It is expected to cut interest rates below
their current 1.25 percent.
The market will also focus on banks as players await the
outcome of stress tests by U.S. authorities to determine how
well lenders would fare if the recession proved deeper and
longer than expected. Results are expected on May 4.
"The recent correction will likely continue and we may see
euro and cable and Aussie dollar pull lower in the next couple
of days," said Ian Stannard, senior foreign exchange strategist
at BNP Paribas.
Meanwhile, the Swedish crown rose to around 11.16 per euro
from around 11.25 crowns after Sweden's Riksbank cut rates by a
smaller-than-expected 50 basis points.
Sweden's central bank slashed its key interest rate to a
record low 0.5 percent. The median consensus in a Reuters poll
was for a 75 basis point reduction although an equal number of
economists had forecast a 50 basis point cut.
The Riksbank said the repo rate was expected to remain at a
low level until the beginning of 2011. It also said there was
some probability of further cuts and of resorting to "other
measures" should the economy deteriorate more than expected.
The Bank of Canada will also announce its rate decision
later in the day, where it is expected to hold interest rates at
a historic low of 0.5 percent but will unveil a list of possible
other steps it could take to stimulate the economy.
(Editing by Ruth Pitchford)
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