Friday June 19, 2009 - 20:31:32 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar drops as recovery hopes lift risk appetite
* Dollar falls, but moves lack conviction
* Focus is on next week's Fed meeting, Treasury auction
* Australian, New Zealand dollars outperform
(Updates prices, adds comment)
By Wanfeng Zhou
NEW YORK, June 19 (Reuters) - The dollar edged lower
against major currencies on Friday, as a recent spate of upbeat
U.S. data boosted expectations the global economy was reaching
That has made investors comfortable buying higher-yielding
currencies such as the Australian and New Zealand dollars as
they pared back holdings of the safe-haven U.S. dollar.
"There's a bit of risk appetite with the S&P 500 bouncing
off its 200-day moving average yesterday, and this has carried
over to today," said Shaun Osborne, chief currency strategist
at TD Securities in Toronto. "That's good news for the Aussie,
Kiwi (New Zealand dollar), and Canada but bad news for the yen
and U.S. dollar."
The positive outlook stemmed from Thursday's data showing
the number of people staying on jobless benefits fell for the
first time since January, while manufacturing in the U.S.
Mid-Atlantic region shrank much less than expected in June.
Moves in the foreign-exchange market were limited, however,
with investors awaiting a Federal Reserve policy meeting and
economic data next week for more clues about the health of the
"The markets ... are in a holding pattern," said Gareth
Sylvester, senior currency Strategist at HiFX in San Francisco.
"There's no real consensus to drive the U.S. dollar
fundamentally weaker or stronger. Overall, the market is still
trying to second guess whether or not we're in a long-term bull
market for equities."
In late New York trading, the euro was up 0.3 percent
against the dollar at $1.3947 EUR=, after hitting a session
peak of $1.4011, according to Reuters data.
The euro has lost momentum above $1.40, and analysts said
the currency is still beset with Europe's economic outlook
after the European Central Bank said this week that European
banks may face another $283 billion in losses by the end of
The dollar fell 0.4 percent to 96.22 yen JPY=, while the
euro was down 0.1 percent at 134.21 yen EURJPY=R.
Adding to recent optimism, International Monetary Fund
First Deputy Managing Director John Lipsky on Friday pointed to
signs the decline in global output has moderated and said the
IMF is likely to revise up its 2010 economic growth forecasts.
This helped push European stocks higher and bolstered
commodity currencies. The Australian dollar gained 0.8 percent
to US$0.8052 AUD=D4 and the New Zealand dollar rose 1 percent
to US$0.6440 NZD=D4.
The improved risk sentiment in the market also pushed
sterling 1 percent higher to trade at $1.6496 GBP=D4
Investors looked ahead to the Federal Reserve's policy
meeting next week. All eyes will be on the statement on
Wednesday where the Fed may provide clues about how it plans to
exit from the recent unconventional measures and whether it may
extend its purchase of U.S. Treasuries. An aggressive expansion
of its buying is seen as unlikely. [ID:nN16283024]
"I think the Fed will give some indication to the market as
to what their plans are," said Greg Salvaggio, senior vice
president of capital markets at Tempus Consulting in
Washington. "What is their plan to take some of this liquidity
out. In addition to that, the market is looking for some
indication if fed funds (rate) will rise later this year."
Another record round of U.S. Treasury auctions -- some $104
billion of debt will be offered next week -- will also be
closely followed for signs of how investor demand is holding up
in the face of an avalanche of new government paper.
"We continue to think that over time, the big increase in
the supply of dollars via increased Treasury issuance will
create headwinds for the U.S. dollar," HSBC in a note.
(Additional reporting by Gertrude Chavez-Dreyfuss; Editing by
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