Monday April 27, 2009 - 08:39:13 GMT
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Reuters - www.reuters.com
FOREX NEWS - Mexico peso falls, dlr, yen rise on flu concerns
* Dlr, yen climb, risk aversion up on swine flu uncertainty
* Euro slides, traders take profits on last week's rally
* Mexican peso falls 3 pct vs dollar, hits 3-week low
(Adds comment, updates throughout; previous TOKYO)
By Naomi Tajitsu
LONDON, April 27 (Reuters) - The Mexican peso fell on Monday
on concerns about swine flu, while uncertainty about the extent
to which the virus may affect markets cranked up risk aversion,
stinging higher-yielding currencies and boosting the dollar and
The euro also slumped across the board as traders locked in
profits from a rally in the single European currency last week
following strong-than-expected economic data from the euro zone
The Mexican peso fell 3 percent against the dollar as the
threat of a flu pandemic rose after more than 100 people were
confirmed to have died from the virus, which has spread across
North America and as far as New Zealand. [ID:nLR65818]
"It's hard to know just how bad it is or who are the likely
winners and losers from the situation and how it will be
contained," said Martin McMahon, currency strategist at Credit
Suisse in Zurich.
He added that the knee-jerk reaction in the currency market
has been to dump high-yielding currencies including the
Australian and New Zealand dollars in favour of the dollar and
the yen, which are considered safe bets in times of uncertainty.
"It's very early days, no one knows the severity of the
situation ... it's hard to see what impact it would have
generally on currencies apart from risk appetite."
By 0757 GMT, the euro <EUR=> had fallen 1 percent to
$1.3125, falling prey to profit taking after the pair rose 1.5
percent last week on the back of a stronger-than-expected
reading of the Ifo institute's German business confidence
The Mexican peso <MXN=> traded at a three-week low around
13.6990 per dollar, roughly 3 percent lower on the day. The pair
ended trade on Friday at 13.284 pesos, according to the central
bank's final reference.
Concerns that the flu may turn into a pandemic stung stock
markets around the world, pushing European shares .FTEU3 down
1.3 percent in early trade.
Heightened risk aversion pushed the higher-yielding
Australian <AUD=D4> and New Zealand <NZD=D4> dollars each down
roughly 1.5 percent against the U.S. currency.
The New Zealand currency was also under selling pressure
before its central bank is expected to cut its rates to a record
low of 2.5 percent this week and signal that rates will not be
raised for a while. [ID:nWEL494385]
Losses in those currencies helped to push the yen up
broadly. The dollar <JPY=> was down 0.5 percent at 96.64 yen
after hitting a one-month low around 96.55 yen in earlier trade.
The euro <EURJPY=R> fell more than 1 percent to 127.20 yen.
Despite its losses against the yen, the dollar rose against
other currencies, pushing its value against a basket of
currencies .DXY up 0.6 percent to 85.245 and pulling back from
a three-week low hit late last week.
Takahide Nagasaki, chief FX strategist at Daiwa Securities
SMBC in Tokyo, said the market needed to see the extent of the
outbreak and its overall impact before any judgments could be
made on the broader market effect.
"What needs to be watched going forward is the kind of
impact the outbreak will have on North American trade and the
movement of people," Nagasaki said.
In addition to the swine flu issue, analysts said that
market participants were also focusing on the euro before the
European Central Bank holds a policy meeting next month.
The central bank is widely seen cutting its key interest
rate to 1 percent from 1.25 percent, and investors are watching
to see whether it will outline possible quantitative easing
measures to help boost the economy.
ECB Governing Council member Nout Wellink was quoted in the
media as saying that the central bank should discuss lowering
rates below 1 percent [nWEA8468]. Another member, Axel Weber,
was quoted separately as saying that a cut to 1 percent was
News from a meeting of world finance leaders in Washington
at the weekend was overshadowed by the swine flu concerns.
The finance leaders agreed there was a "break in the clouds"
of the economic storm but said more measures were needed to
ensure an end to the global recession.
A statement from the International Monetary and Financial
Committee of the IMF said more action was needed to restore the
health of banks and revive lending. [ID:nN25478350]
(Additional reporting by Tokyo Forex Team, editing by Toby
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