Monday June 22, 2009 - 11:20:27 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro slides ahead of ECB refi op; Fed awaited
FOREX-Euro slides ahead of ECB refi op; Fed awaited
* Euro dips to session low of $1.3835 EUR=
* Euro sold on uncertainty before ECB 1-yr refi operation
* German June Ifo business climate index at 85.9
* Market wary before Fed meeting, U.S. debt auctions
(Changes byline, adds quote, updates prices)
By Farah Master
LONDON, June 22 (Reuters) - The euro fell against the dollar
and yen on Monday, and higher-yielding and commodity-linked
currencies also slipped on investor concern for global growth
The euro came under pressure as the market awaited the
European Central Bank's first ever one-year refinancing
operation on Wednesday aimed at getting banks lending again and
reducing the cost of borrowing for banks, firms and consumers.
"I think the market is just cautious ahead of the ECB
refinancing operation and what it will mean for rates," said
Audrey Childe-Freeman, currency strategist at Brown Brothers
The euro remained under pressure even after data showed a
stronger-than-expected reading in German business sentiment.
"It was overall mildly positive but the fact that the
current assessment index is failing to show any improvements
suggests yes, sentiment is improving but we are still in
contraction in terms of activity levels," said Childe-Freeman.
Data on Monday showed German Ifo business climate index rose
to 85.9 in June from 84.3 the previous month, beating forecasts
of 85.2. The current conditions index was at 82.4, versus a
forecast of 83.1. [ID:nBAE001669]
"The worst should be over but the ongoing improvement is
likely to be too weak to seriously discuss a recovery," said
Carsten Brzeski, economist at ING Financial Markets.
By 1032 GMT, the euro was down 0.7 percent at $1.3847 EUR=
after hitting a session low of $1.3835, according to Reuters
data. It was down 1 percent against the yen at 132.82 yen
Traders also cited a Wall Street Journal article about
Germany's widening budget shortfall as an excuse to sell euros,
while renewed concerns about the banking sector in the euro zone
also weighed on the single currency.
Meanwhile, ECB Governing Council member Ewald Nowotny was
quoted on Monday as saying the central bank was likely to keep
interest rates on hold for the rest of this year.
"If the economy is developing in the way that we expect, I
do not see a perspective for this year and we will need to look
again next year," he told news agency Bloomberg.
Such a view confirmed market expectations after the ECB kept
interest rates at a record low 1 percent earlier this month.
Markets have drifted in the past few days as investors are
still trying to decide if a three-month rally in riskier assets,
including shares, has outrun the pace at which the global
economy is healing.
The Australian dollar fell 1.2 percent to $0.7960 AUD=D4
while it fell 1.5 percent against the yen to 76.38 yen
The New Zealand dollar fell 1.1 percent to $0.6351 NZD=.
News that ratings firm Moody's had warned California it
faced a "multi-notch" downgrade in its credit rating if it
failed to act quickly to produce a budget had also fuelled
investor unwillingness to hold riskier positions, one trader
The dollar was down 0.3 percent at 96.00 yen JPY=, after
falling to around 95.80 yen earlier.
The U.S. Federal Reserve's policy-setting Open Market
Committee meets on Tuesday and Wednesday and the market is
expecting the central bank to give a slightly brighter economic
view while watching whether it will address a recent rise in
Treasury debt yields, and its debt buyback programme.
Markets will also keep an eye on a record $104 billion in
U.S. Treasury debt to be auctioned this week.
(Reporting by Farah Master)
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