Tuesday June 9, 2009 - 20:20:02 GMT
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Reuters - www.reuters.com
FOREX NEWS-US dollar falls as investors pare bets for higher rates
* Euro rises above $1.41 as dollar gives back gains
* Investors reassess U.S. rate view, growth outlook
* Sterling firmer on data, lull in political storm
* 10 U.S. banks to pay back taxpayer funds
(Adds details. Updates prices)
By Vivianne Rodrigues
NEW YORK, June 9 (Reuters) - The U.S. dollar fell broadly
on Tuesday, ending a two-day winning streak, as investors
questioned whether the economy had improved enough to justify
talk of higher U.S. interest rates by year end.
The euro rose above $1.41 and sterling also rallied sharply
though the U.S. Treasury said 10 of the country's biggest banks
could repay $68 billion in taxpayer money received during the
height of the credit crisis, boosting hopes the worst is over.
Nonetheless, investors were growing less certain that the
Federal Reserve would need to raise interest rates in 2009, a
view that gained traction last week after data showing a slower
pace of U.S. job losses in May boosted the dollar and two-year
Joseph Trevisani, chief market strategist at FX Solutions
in Saddle River in New Jersey, said investors who bought the
dollar recently betting on higher borrowing costs were at
"Interest rates are not going to go up in this country
anytime soon," he said.
The euro rose earlier to a session peak of $1.4102
<EUR=EBS> before easing to $1.4069, up 1.3 percent on the day,
while sterling added 1.7 percent to $1.6323 <GBP=D4> after
falling to around $1.58 Monday. The dollar fell 1 percent to
97.44 yen <JPY=>.
Investors remained wary of making big bets in favor of the
dollar, especially as they re-thought the chances of a Fed rate
rise this year.
Still, investors remained wary of making big bets in favor
of the dollar, especially as they re-thought the chances of a
Fed rate rise this year. Short-dated Treasury yields eased on
Tuesday after touching seven month highs on Monday.
Demand for the U.S. dollar remained low even after an
auction of 3-year notes by the Treasury Department showed
strong demand for the debt. See [ID:nTAR000708].
"I fully expect the dollar to trend weaker over the next
several weeks unless big problems in Europe develop," said
Michael Woolfolk, a senior currency strategist at The Bank of
In Europe, stronger-than-expected UK housing data and
fading fears of a government collapse lifted sterling, with
traders saying the market was relieved to see some members of
Prime Minister Gordon Brown's Labor Party offer him their
The euro wobbled overnight after a sharp slide in German
industrial output suggested the biggest euro zone economy is
still facing weak global demand for its goods.
But hope that Latvia, one of the most troubled economies in
Eastern Europe, may yet avoid devaluing its currency helped the
euro. The Swedish crown also soared against the dollar <SEK=>
and euro <EURSEK=> after Latvia's finance minister said
devaluation of the lat was "absolutely out of the question."
Sweden's currency had fallen sharply because of Swedish
bank exposure to Latvia's economy, which may shrink by as much
as 18 percent this year.
The dollar could rebound, however, if the situation in
Eastern Europe deteriorates or if other euro zone countries see
their sovereign credit ratings cut as Ireland did on Monday,
said Dan Cook, analyst at IG Markets in Chicago.
"The market is like a kid learning to ride a bike," he
said. "He feels confident as long as the parents hold his
shoulders, but if they let go, it could be a different story."
(Additional reporting by Steven C. Johnson in New York)
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