Friday November 20, 2009 - 21:29:10 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar advances; traders trim risk exposure
* Dollar up for second straight day as risk appetite fades
* Stocks decline, banks park funds in Treasuries
* High-yielders such as Australian dollar fall
(Recasts, updates prices)
By Nick Olivari
NEW YORK, Nov 20 (Reuters) - The dollar rose for a second
straight session on Friday as risk tolerance fell and investors
cut exposure to assets and currencies perceived as higher risk
ahead of a holiday-shortened week in the United States.
European and U.S. shares declined alongside oil, gold and
high-yield currencies such as the Australian dollar.
The dollar is down some 14 percent since mid-March as signs
of global recovery prompted investors to favor higher-yield
currencies and assets. Expectations for U.S. interest rates to
remain at record low levels into 2010 also hurt the greenback.
"It's been a very good year for a lot of people, and it
makes sense that players are going to square up positions today
ahead of the U.S. holiday and month end," said Michael
Woolfolk, strategist at BNY Mellon in New York.
U.S. markets will be shut next Thursday for Thanksgiving
with many traders and investors also taking Friday off as
vacation, while Monday marks a national holiday in Japan.
The dollar was off highs for the day but still firmer
against most major currencies.
The euro fell 0.4 percent to $1.4859 EUR= after touching
a two-week low of $1.4800.
Against the yen, the dollar slipped 0.1 percent to 88.98
yen JPY= while the euro fell below and then hovered around
its 200-day moving average near 132.10 yen EURJPY=.
Reaction was muted as the Bank of Japan kept interest rates
at a record low 0.1 percent, as expected, and upgraded its
assessment on the economy.
Sterling shed 0.9 percent to $1.6502 GBP= and the
Australian dollar lost 0.4 percent to $0.9153 AUD=, after
earlier touching a two-week low. It was headed for a 2.1
percent decline this week at current prices.
Some analysts said investors wanted to see more evidence
that the world economy is back on track before blindly buying
risky assets in the hope of higher returns. For more see
European Central Bank President Jean-Claude Trichet said on
Friday it was too early to say the financial crisis was over,
and warned banks risked becoming addicted to cheap money from
emergency government stimulus programs and must be prepared for
its withdrawal. [ID:nLK354566]
Andrew Wilkinson, senior analyst with Interactive Brokers
in Greenwich, Connecticut, said some investors "are starting to
get cold feet over the health of asset market rallies, taking
the line that stocks have come too far too soon and that they
should -- if only for safety's sake -- perhaps hold onto their
dollars after all." The dollar index, a non-traded
calculation which measures the dollar's performance against a
basket of six other major currencies, was up 0.4 percent on
the day at 75.606 .DXY, well above a 15-month low of 74.679
touched on Monday.
Traders said gains in the futures contract of the dollar
index were based on a faulty trade and the ICE Futures Exchange
said it had canceled trades above 76.50. [ID:nWNA8455]
Some 17,847 December futures contracts DXZ9 changed hands
on Friday compared with average daily volume year to date of
8,303. The futures contract was up 0.4 percent at 75.695. Open
interest was reported at 38,272.
The greenback was also supported as banks parked funds in
safe-haven assets such as U.S. government bonds to
"window-dress" their books ahead of closings at the end of this
month and next.
Rates on short-dated U.S. government paper fell on Friday,
with the two-year Treasury note US2YT=RR yield at one point
falling to the year's low beneath 0.68 percent.
(Additional reporting by Steven C. Johnson in New York and
Naomi Tajitsu in London; Editing by James Dalgleish)
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