Monday April 27, 2009 - 20:45:34 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar, yen climb as flu outbreak sours risk appetite
* Dollar hits 1-month low vs yen; euro at 6-week trough
* Mexican peso has worst day vs dlr in six months
* Euro posts largest 1-day drop vs dollar in a month
* Nowotny: ECB ready to use quantitative easing if needed
(Updates prices, adds analyst comments)
By Gertrude Chavez-Dreyfuss
NEW YORK, April 27 (Reuters) - The U.S. dollar and yen rose
across the board on Monday as worries about a widening outbreak
of swine flu in Mexico drove investors to seek shelter in the
perceived safety of both currencies.
The euro, meanwhile, posted its biggest one-day fall
against the dollar in a month after a top European Central Bank
official said the bank was ready to use quantitative easing
measures if needed.
News of the flu pandemic, which drove fears about a delay
in any global economic recovery, pushed the yen to a one-month
peak versus the dollar and a six-week high versus the euro, and
likewise weighed on U.S. stocks. The flu scare also drove the
Mexican peso to its worst performance against the greenback in
six months and pressured currencies seen as higher risk, such
as the Australian and New Zealand dollars.
"The swine flu has pushed traders to the safety of the yen,
although I don't expect this to have a very long life," said
Andrew Wilkinson, senior market analyst at Interactive Brokers
in Greenwich, Connecticut. "The news has the potential to
reduce travel, tourism, trade, and to keep consumers away from
In late afternoon trading, the dollar fell 0.4 percent
against the yen to 96.80 yen <JPY=>, close to an earlier
one-month low around 96.44 yen, according to Reuters data. The
euro lost 1.9 percent to 125.82 yen <EURJPY=R>. It earlier fell
to around 125.61, the lowest since March 16.
Against the dollar, the euro fell 1.7 percent to $1.3028
<EUR=>, its worst day since March 27, extending losses after
ECB governing council member Ewald Nowotny said euro zone rates
will stay low for a long time. He also set the stage for
possible unconventional measures of quantitative easing. See
ECB President Jean-Claude Trichet, on the other hand,
hedged a little on quantitative easing, but kept the door open.
He said any announcement on nonstandard policies will be
announced at the ECB policy meeting on May 7.
The ECB is widely seen cutting its key interest rates to 1
percent from 1.25 percent at that meeting.
EURO, MEXICAN PESO WOES
"Euro/dollar has dropped more than a big figure since ECB's
Nowotny's comments," said an analyst with Forex.com in
Bedminster, New Jersey. "It's still not a done deal for the ECB
on quantitative easing, but for the time being and until we
hear otherwise, markets look set to exact punishment on the
The Mexican peso <MXN=>, meanwhile, traded at around
13.9410 per dollar, with the greenback up 4.7 percent on the
day, its best performance since October 2008. The U.S. dollar
also hit a nearly one-month high at 13.9760 pesos.
The swine flu in Mexico, which has spread across North
America and as far as New Zealand, may have killed 149 people
and the number of cases is seen rising, according to Mexican
Health Minister Angel Cordova. For more, see [ID:nN27535149].
An increase in risk aversion on concerns the flu may turn
into a pandemic also stung the higher-yielding Australian
dollar <AUD=>, down 1.8 percent against the U.S. dollar at
US$0.7104, and the New Zealand dollar <NZD=>, down 0.7 percent
The New Zealand currency was also pressured because its
central bank is expected to cut interest rates to a record low
of 2.5 percent this week and signal no chance of a rise for a
Analysts noted, however, that the intense overall risk
aversion may be overdone and could fade as long as news on the
flu outbreak wanes.
"If the virus outside Mexico remains mild with none/few
fatalities, this story will remain contained," said Alan
Ruskin, chief international strategist at RBS Global Banking
and markets in Greenwich, Connecticut.
"If it gets serious, obviously the repercussions will not
be isolated to Mexico and it will be harder to pick on the
Mexican peso on a relative currency play."
(Additional reporting Nick Olivari; Editing by Leslie Adler)
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