Wednesday May 27, 2009 - 10:52:48 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar inches up on ECB remarks; cable hits $1.60
* Dollar index pushes higher
* ECB comments keep euro below $1.40
* Sterling scales $1.60 for first time since Nov
* Eyes on stocks, Treasury auction, US data
(Adds quotes, updates prices)
By Kirsten Donovan
LONDON, May 27 (Reuters) - The dollar rose against the euro
on Wednesday after a European Central Bank policymaker said
further interest rate cuts couldn't be ruled out, but it fell
against a buoyant British pound, which reached $1.60.
ECB Governing Council member Erkki Liikanen was quoted as
saying on Wednesday that the bank's current key interest rate of
1 percent isn't necessarily the lowest it can go.
That prompted some profit taking after the euro tested $1.40
again overnight, while surprisingly strong demand at Tuesday's
auction of two-year U.S. Treasury notes allayed fears over
investor appetite for U.S. assets, supporting the dollar.
"It's primarily a euro/dollar story and the fact that we
poked up above $1.40 again has prompted some profit taking, the
dollar isn't looking that firm elsewhere," said Adam Cole,
global head of FX strategy at RBC Capital Markets.
"Overall it's a mixed performance for the dollar and that
reflects the fact that we're not seeing much of a lead from the
stock market, so we'll wait and see where the U.S. opens."
Sterling outperformed the euro, hitting $1.60 for the first
time in almost seven months as investors continued to pare back
the large bets against the currency built up after the collapse
of Lehman Brothers last year.
At 1000 GMT the euro, which has risen about 10 percent in
three months to hit a four-month peak above $1.4050 last week,
was back below $1.40 on Wednesday, trading at $1.3952, down 0.2
percent on the day.
The dollar was up 0.2 percent against a basket of six major
currencies at 80.21, although it was still within sight of a
five-month low set on Friday just below 80.00.
Sterling was up 0.5 percent at $1.6017, having traded as
high as $1.6023.
A thin economic data calendar from Europe on Wednesday
leaves currency traders to take their cue from equity markets
which, along with commodities, remain buoyed by Tuesday's sharp
rise in U.S. consumer confidence.
Niels Christensen, FX strategist at Nordea in Copenhagen,
said traders may be concerned over U.S. sovereign ratings but at
the same time "aren't too enthusiastic" about the euro zone from
a data or banking sector standpoint.
In this context, Liikanen's commments echoing what some
other ECB Governing Council members have said recently about the
possibility of further rate cuts "are obviously not supportive
for the euro", he said.
The dollar was last up 0.4 percent against the yen at 95.38
yen, the euro was also up 0.2 percent at 133.18 yen and sterling
touched its strongest level since November at 152.79 yen,
according to Reuters data.
The U.S. Treasury sold $40 billion of debt on Tuesday and
sells another $61 billion this week, kicking-off with a $35
billion sale of five-year paper later on Wednesday.
Traders said the market is still closely watching economic
indicators such as U.S. housing data. Figures for existing home
sales in April will be released on Wednesday, and new home sales
data for the same month come out on Thursday.
The biggest mover among major currencies on Wednesday was
sterling, which rose above the $1.60 level against the dollar
and gained almost 1 percent against the euro.
"The current across-the-board sterling gain has further
momentum ahead," said Neil Jones, head of FX hedge fund sales at
Mizuho in London.
"The 'win treble' for the UK economy of low interest rates,
undervalued currency and oversold assets is proving attractive
to overseas (investors). The global investor store of idle cash
reserves will continue to gravitate towards sterling and away
from the dollar and yen," Jones said.
The euro was last down 0.9 percent at 87.00 pence, close to
testing key technical support at the 200-day moving average of
(Additional reporting by Jamie McGeever)
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