Thursday May 14, 2009 - 10:59:12 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar supported, weak U.S. data, shares sting risk
* Dollar draws support from sluggish shares
* Weak U.S. sales data underlines long road to econ recovery
* ECB policymaker comments underline divided policy views
(Adds comment, updates throughout)
By Naomi Tajitsu
LONDON, May 14 (Reuters) - The dollar inched up on Thursday,
supported after sluggish U.S. retail sales figures reminded
investors that recent optimism about a global economic recovery
may be premature and kept risk aversion high.
Ongoing uncertainty about the recovery in the global economy
was highlighted by movements in European shares, which bobbed
between positive and territory and helped to keep currencies
hemmed in narrow ranges.
"There's volatility in viewpoints (about the economy) at the
moment, which is creating instability," said Marc Ostwald,
strategist at Monument Securities.
"The currency market, and particularly euro/dollar, is
keeping an inordinately close eye on equities," he said, adding
that even the slightest bump lower in share prices was putting
some selling pressure on the pair.
By 0951 GMT, the euro <EUR=> had slipped 0.1 percent to
$1.3585, pulling back from a session high around $1.3623 hit
after European shares briefly recovered earlier losses and
The pair stayed near $1.3525 <EUR=> touched on trading
platform EBS earlier in the day, its weakest since late last
week, while keeping its distance from a seven-week high of
$1.3722 hit on Wednesday.
Concerns that a global economic recovery will take much more
time kept investors cautious about taking on risky positions,
stinging share prices and prompting some to reverse aggressive
short-dollar positions accumulated earlier in the week.
The dollar is often considered a safe-haven bet in times of
The U.S. currency .DXY rose slightly against a basket of
currencies to 82.661, extending its recovery after the dollar
index hit a four-month low of 81.998 earlier in the week,
according to Reuters data.
European shares .FTEU3 fell 0.3 percent, which also helped
to prompt investors to exit positions in higher-risk currencies,
helping to prod the high-yielding Australian dollar roughly 0.4
percent lower versus the dollar <AUD=D4> and the yen <AUDJPY=R>.
Sluggish stock prices offered broad support to the yen,
nudging the dollar <JPY=> down as low as 95.14 yen in Asian
trade to match its weakest level in nearly two months. The pair
later pulled back to around 95.35 yen.
The euro <EURJPY=R> slipped 0.3 percent to 129.41 yen, while
sterling/yen fell 0.2 percent <GBPJPY=R>.
With few major economic data releases in the euro zone,
traders remained focussed on data on Wednesday which showed
cash-strapped U.S. consumers continue to hold back from
purchases due to job losses, falling home prices and tighter
Dealers were waiting for figures on U.S. weekly jobless
claims and producer prices due later in the day for more clues
into how long the country's economic recovery will take.
The euro offered little sustained reaction to comments by a
handful of European Central Bank Governing Council members who
separately offered diverse views on the outlook for interest
rates and "non-standard" policy measures to help the euro zone
weather the downturn [ID:nLD864384].
ECB Vice President Lucas Papademos on Thursday said he had
observed more positive signs suggesting economic stabilisation
and that a recovery may start sooner than previously envisaged.
His comments contrasted with Governing Council Member Nout
Wellink, who cautioned against becoming too optimistic about the
Ewald Nowotny said the ECB's key rate may eventually
approach "the lower boundary of zero", while adding that in such
a situation, the central bank had other measures to turn to.
[ID:nLE649859] The ECB cut its main rate by 25 basis points to
1.0 percent last week.
His colleague, Axel Weber, on Wednesday reiterated that very
short-term interest rates are now at an appropriate level.
Earlier in the week, he said there was no need for the ECB
to expand its asset purchase programme after it announced it
would start buying covered bonds.
Analysts said comments from the ECB underlined brewing
disagreement between policymakers regarding how much lower rates
can fall, and the extent to which quantitative easing measures
may be expanded to help the euro zone economy weather the
"If the disagreement between the doves and the hawks in the
ECB become more vocal, that will result in a downside for the
euro," said Lee Ferridge, vice president and senior macro
strategist at State Street in London.
(Editing by Toby Chopra)
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