Wednesday June 17, 2009 - 10:40:50 GMT
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Reuters - www.reuters.com
FOREX NEWS - Dollar recovers, weak stocks sting risk demand
* Dollar index little changed on day, recovers early losses
* Weaker shares prompt pullback in high-risk currencies
* Market awaits U.S. CPI data
By Naomi Tajitsu
LONDON, June 17 (Reuters) - The dollar was little changed
against a basket of currencies on Wednesday, recovering from an
early slide as weaker European shares prompted traders to sell
back some positions in higher-risk currencies.
The euro trimmed early gains against the dollar, while
higher-yielding currencies including the Australian and New
Zealand dollar slipped after European shares .FTEU3 fell
roughly 1.5 percent, following a slide in U.S. stock futures.
"There's been a bit of an unwinding in risk due to the slide
in equities," said Paul Robson.
He added that risk demand has been struggling to gain more
traction in recent sessions as investors reassess whether the
global economy is poised for a recovery just yet.
Other analysts said that a division within the market on
this issue has led to a consolidation phase as investors look
for more signs that the worst of the downturn may be over.
Markets offered limited initial reaction to figures showing
an unexpected rise in the euro zone's trade surplus
By 1005 GMT, the euro <EUR=> was at $1.3973, up 0.3 percent
on the day but pulling back from a climb to around $1.3925.
Some in the market said that trade in the pair may be
volatile in the $1.3900 region ahead of options due to expire at
that level later in the day. IFR reported that such options were
worth 200 million euros.
The dollar index .DXY was essentially flat, recovering
from an earlier slide. The U.S. currency <JPY=> was down 0.2
percent against the yen, which recovered from early losses
across the board and rose against higher-risk currencies.
The higher-yielding Australian <AUD=D4> and New Zealand
dollars <NZD=D4> were both down slightly on the day,
relinquishing early gains as a slip in U.S. stock futures stung
risk appetite. Both currencies also slipped versus the yen.
Market participants said that traders were focussing on S&P
futures SPv1, which were trading at 906.50, approaching its
200-day moving average around 904.78.
A break below this key level may trigger more selling,
suggesting increasing risk aversion which may support safe-haven
demand for dollars, they said.
U.S. CPI AWAITED
Analysts said that a statement underlining the need for a
more diversified monetary system from leaders of the emerging
BRICs nations on Tuesday was having limited impact on the dollar
on Wednesday [ID:nLG674351].
The statement made no mention of support for a smaller
international role for the dollar, which cooled some selling
pressure on the dollar after it slipped on Tuesday when the
Kremlin had said the issue would be discussed at the meeting.
The status of the dollar's role as the main reserve currency
has been in focus after Moscow last week said it would cut the
amount of U.S. Treasuries it held.
To glean a better picture of the state of the U.S. economy,
traders awaited data on U.S. inflation and mortgages later in
U.S. core CPI is seen rising 0.1 percent in April on the
month, which would be the smallest rise this year, while it is
seen continuing to fall on the year.
Analysts said this would suggest that inflation pressures
remain subdued and may quell some speculation for a rise in U.S.
interest rates by year-end.
(Reporting by Naomi Tajitsu; Editing by Victoria Main)
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