Tuesday November 3, 2009 - 11:36:12 GMT
Share This Story
Reuters - www.reuters.com
FOREX NEWS-Dollar gains as stocks fall; sterling sinks
Tue Nov 3, 2009 6:16am EST
* Euro down; dollar index hits one-month high .DXY
* European bank shares index down 3.6 pct
* Sterling falls sharply on UK bank shake-up, weak data
* FOMC meets; Aussie down on dovish RBA after rate hike
(Adds quotes, updates prices)
By Tamawa Desai
LONDON, Nov 3 (Reuters) - The dollar hit a one-month high against of basket of currencies on Tuesday as investors retreated from risk assets on renewed jitters over banks.
Falls in European share prices stemming from bank sector concerns boosted the dollar, which tends to gain when investors shed risk assets. That also helped the yen, which strengthened against the euro and dollar.
European shares were down 1.9 percent by mid-morning, with banks the biggest fallers after disappointing results from UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz) and a shake-up of UK banks. The DJ STOXX European bank index was down 3.6 percent.
The euro slipped to a four-week low of $1.4646 EUR=, reversing the previous day's gains on firm manufacturing data.
"There is a general sense of risk aversion," said Geoffrey Yu, currency strategist at UBS.
Some attributed losses in banks shares and the euro partly to European Commission estimates of bank losses renewing concerns over the sector's health.
The EU Commission quoted results of stress tests in the banking sector, published in early October, which said losses could amount to 400 billion euros in 2009-10.
"Although several financial stress indicators are back at pre-crisis levels, the banking sector remains fragile," the Commission said.
The euro also fell 1.0 percent against the yen EURJPY=R to 132.01 yen while the dollar also dropped 0.3 percent against the Japanese unit to 90.01 yen JPY=.
Tokyo markets were closed on Tuesday for a national holiday.
Sterling tumbled to a one-week low against the dollar after the UK Treasury announced a shake-up of British banks, which raised concerns about its financial system.
The government will raise its stake in Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) and Lloyds Banking Group (LLOY.L: Quote, Profile, Research, Stock Buzz) raised a record 13.5 billion pounds ($22 billion) in a rights issue.
The dollar index .DXY rose to 76.742, its highest since early October.
Some traders said profit-taking on risk assets, already seen in equities, could materialise ahead of funds' book-closings this month and next.
"Year-end position liquidation could also prove disruptive to capital markets as investors crystallise this year's gains," said UBS's Yu.
WARY AHEAD OF FED
Traders remained wary ahead of big events this week -- the U.S. Federal Reserve starts a two-day policy-setting meeting on Tuesday and the European Central Bank and the Bank of England also hold policy meetings later in the week. [ECB/INT] [BOE/INT] Key U.S. jobs data is due out on Friday.
The Fed is expected to keep its benchmark interest rate unchanged near zero, where it has been since December. The focus is on how policymakers will represent future options, but many analysts say the Fed is unlikely to change the wording of its pledge to keep rates low for an "extended period." [FED/R]
The Fed will announce its decision on Wednesday.
The Australian dollar fell more than one percent against the U.S. dollar to $0.8916 AUD=D4, extending losses after the Reserve Bank of Australia (RBA) raised its cash rate for the second month running, to 3.5 percent from 3.25 percent, as expected, but left markets guessing if it would hike again as soon as December. [ID:nSYD339317]
Markets were still pricing in the chance of a 25 basis point increase in December RBAWATCH, albeit a reduced chance.
Commodity currencies rose in the Asian session after the International Monetary Fund sold 200 tonnes of gold to the Reserve Bank of India, executing half of a long-planned sale.
(Additional reporting by Charlotte Cooper in Tokyo; editing by Nigel Stephenson)
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."