Thursday June 4, 2009 - 20:52:05 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro rises on ECB rate view; US jobs data loom
* ECB rates seen remaining at 1.0 percent for some time
* BoE, BoC leave rates steady
* Focus on U.S. non-farm payrolls report
(Recasts, updates prices, adds comment)
By Gertrude Chavez-Dreyfuss
NEW YORK, June 4 (Reuters) - The euro edged higher against
the U.S. dollar on Thursday as the European Central Bank
signaled it will keep interest rates steady for some time,
reinforcing the market's belief that the global recession was
Actions by the Bank of England and Bank of Canada, which
kept interest rates unchanged, also affirmed the view that
economic recovery was in view, analysts said, undermining the
yen. The Japanese currency, which tends to fall when economic
optimism rises, weakened broadly, posting sharp losses against
the dollar and euro.
"The tone of the markets is changing as investors are
bracing for a recovery," said Kathy Lien, director of FX
strategy, at GFT in New York.
"Central banks from around world now expect positive growth
in 2010 and despite the concern about the safety of the U.S.
dollar, equities are trading at (multi-month) highs."
In late afternoon trading, the euro was last up 0.2 percent
against the dollar at $1.4180 <EUR=EBS>, according to
electronic trading platform EBS, having swung between a peak of
$1.4242 and a low $1.4070.
The euro rose across the board on what markets believed to
be euro-bullish comments by Trichet.
Despite the European central bank's expectations for a much
sharper recession in the euro zone this year than previous
forecasts, Trichet said the ECB's current interest rates are
appropriate for now.
"The ECB's reluctance to ease policy further opens the way
for further euro strengthening," said Marco Annunziata, chief
economist at Unicredit Group in London.
The ECB also reiterated plans to buy 60 billion euros in
covered bonds, spread across the euro zone, in both primary and
secondary markets, moves that analysts said seemed to bolster
expectations that the bank won't cut interest rates anymore.
The euro posted sharp gains versus the yen, up 1.0 percent
at 137.08 <EURJPY=EBS>, and climbed 0.9 percent against
sterling to 87.55 pence <EURGBP=D4>.
A comment by Trichet at the news conference after the
bank's policy meeting, that it was important Washington had
expressed support for a strong dollar, briefly trimmed losses
in the greenback. But that did not change sentiment on the
Commodity-linked currencies such as the Canadian and
Australian dollars, meanwhile, benefited from the rise in oil
and gold prices. Higher oil prices also boosted energy shares,
lifting the U.S. stock market and boosting risk sentiment in
The British pound was lower against the U.S. dollar as the
Bank of England also left its benchmark rate unchanged at 0.5
percent. It last traded down 0.6 percent at $1.6194<EURGBP=>.
The focus shifted to politics as the pound fell sharply on
speculation British Prime Minister Gordon Brown would resign,
which was quickly dismissed by his office as "absolute
The Canadian dollar, meanwhile, initially dropped against
the U.S. currency after the Bank of Canada kept rates
unchanged, as expected. By late afternoon trading, however, the
U.S. dollar fell 1.5 percent to C$1.0963 <CAD=D4>.
With central bank decisions out of the way, markets are now
focused on the U.S. non-farm payrolls report for May. A Reuters
poll showed markets are expecting U.S. job losses of 520,000.
Dan Cook, a market analyst at IG Markets in Chicago after
the ADP private sector jobs report came out weaker than
expected, many are concerned that expectations that the
economic slump was easing "may have been way off target."
"If the (jobs) number comes out worse than expected I will
look for strength in the dollar versus sterling and euro...as
traders move to a risk averse stance."
(Additional reporting by Nick Olivari)
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