Wednesday April 29, 2009 - 11:10:27 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar, yen slip on lower risk aversion
* Dollar, yen fall as risk aversion eases somewhat
* Euro boosted by improving EZ business sentiment
* Dollar index down 0.3 pct; euro/dlr up 0.8 pct
* Market awaits US Q1 GDP, Fed rate meeting
(Adds quotes, comments, updates prices)
By Naomi Tajitsu
LONDON, April 29 (Reuters) - The dollar slipped against
other major currencies apart from the yen on Wednesday as a
recovery in global share prices quelled some risk aversion,
while the euro gained on improving regional business sentiment.
A 1 percent rise in European shares .FTEU3 helped to
prompt investors to cover short positions in currencies
including the euro, which fell earlier in the week after
concerns about swine flu triggered risk-averse selling.
Also helping the euro was a European Commission survey
showing that economic sentiment in the region improved to 67.2
points in April from 64.7 in March, rising more than
expectations for a climb to 65.2 points [ID:nLT148975].
Markets awaited the release of first quarter growth figures
in the United States, as well as a policy decision by the U.S.
Federal Reserve later in the day.
Analysts said traders picked up currencies perceived to be
higher risk, including the euro, sterling and the Australian and
New Zealand dollars, after selling them at the start of the week
when concerns about the swine flu outbreak escalated.
"The market was slightly positioned for risk appetite, and
when the (swine flu) news came out, it shook out those
positions," said Robert Minikin, senior currency strategist at
Standard Chartered in London.
He added that those positions were being put back on again,
particularly after the improvement in euro zone business
confidence reinforced the recovery in risk appetite.
"What we saw on Monday and Tuesday should not be seen as
more than a transitory dynamic," he said, adding that overall
risk demand was continuing to improve.
The euro <EUR=> was up 0.8 percent at $1.3240, near a
session high around $1.3246. The single currency recovered after
falling as low as around $1.2960 on Tuesday.
Gains in the euro helped to push the dollar down 0.6 percent
against a basket of currencies .DXY to 84.675. A fall under
84.452 would mark its lowest since early April.
Improving risk demand stung the yen, which along with the
dollar had rose earlier in the week, when uncertainty about the
impact of a spread in swine flu had sparked safe-haven buying in
the two currencies, which are considered low-risk.
The euro <EURJPY=R> climbed roughly 1.5 percent to 128.57
yen, pulling back from a six-week low below 124.40 yen on
Tuesday. The dollar rose 0.3 percent at 96.64 yen <JPY=>.
Higher-yielding currencies were also up, with the Australian
<AUDJPY=R> and New Zealand <NZDJPY=R> dollars each climbing more
than 2 percent against the yen.
U.S. DATA, FED AWAITED
Markets await first-quarter U.S. gross domestic product
figures to be released at 1230 GMT. Economists forecast an
annualised contraction of 4.9 percent, but estimates range as
deep as an 8.0 percent drop ECONUS.
The data follows stronger-than-expected U.S. economic data
on consumer confidence and home prices, as well as positive
corporate earnings results, which supported tentative hopes the
economy may be stabilising and improved risk sentiment.
The Fed ends a two-day meeting on Wednesday and as rates are
already near zero, markets will be looking for any extension of
quantitative easing and will focus on the central bank's
economic outlook amid signs that a downturn is easing. A
statement is due out around 1815 GMT.
Despite recovering risk demand on Wednesday, some analysts
were wary about pushing the dollar significantly lower in the
"While the dollar is under some pressure, we would be
cautious over further near-term losses, with both swine flu
issues and Monday's bank stress test results offering concern,"
said Tom Levinson, currency strategist at ING.
Results from stress tests on U.S. banks are due next week.
On Tuesday, the Wall Street Journal reported regulators had told
Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) and Bank of America (BAC.N: Quote, Profile, Research, Stock Buzz) they may need to
raise more capital based on early results of the tests.
(Additional reporting by Tamawa Desai, editing by Ron Askew)
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