Wednesday November 25, 2009 - 12:29:33 GMT
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Reuters - www.reuters.com
FOREX-Dollar index hits 15-mth low after Fed minutes
* Dollar hits 15-mth low vs currency basket
* FOMC minutes: Dollar decline has been "orderly"
* Dollar/yen hits 10-mth low, nears 13-year trough
(Adds comment, updates throughout)
By Naomi Tajitsu
LONDON, Nov 25 (Reuters) - The dollar hit a 15-month low
against a currency basket on Wednesday after Federal Reserve
minutes showed policymakers saw the U.S. currency's recent
decline as "orderly".
Traders dumped the U.S. currency across the board, pushing
it down to a 10-month low against the yen, as the minutes also
reinforced the view U.S. interest rates will stay essentially at
zero until around mid-2010.
The U.S. currency's latest bout of weakness came as European
shares rose 0.7 percent and gold XAU= hit a record
high of $1,179.80, underlining the trend for investors to
diversify away from the dollar and into other assets.
Minutes from the U.S. central bank's November meeting showed
board members considered the dollar's fall against major
currencies since March "orderly", further persuading investors
the U.S. currency will stay weak. [ID:nN24313828]
"When the Fed says the dollar's decline has been 'orderly'
...they're implicitly saying this is not something they will do
anything about," said Johan Javeus, chief currency strategist at
SEB in Stockholm.
The dollar has been sold for much of 2009, falling 8 percent
on a trade-weighted basis and 30 percent versus the
high-yielding Australian dollar since January on the view U.S.
rates will stay low as other countries start to raise theirs.
By 1144 GMT, the dollar index .DXY, which measures its
performance against a basket of six currencies, had fallen 0.8
percent to 74.438.
The euro EUR= hit a 15-month high of $1.5096 and was last
up 0.8 percent at $1.5076. The Swiss franc CHF= briefly hit
parity against the U.S. dollar.
Traders said dollar losses accelerated after Russia's
central bank said it would use part of its reserves to purchase
Canadian dollars, underlining moves by central banks to
diversify out of the U.S. currency.
The dollar fell 1 percent to 87.64 yen JPY=, according to
Reuters data, off a low of 87.57. It approached a 13-year low of
87.10 hit in January.
A strong yen is seen hindering growth in Japan, which relies
heavily on exports to keep it as the world's No. 2 economy. Yen
strength makes exports expensive, cutting demand from overseas.
Data on Wednesday showing exports rose on the month in
October while posting a smaller-than-expected fall on the year
suggested Japanese firms may be weathering yen strength at the
ORDERLY DOLLAR FALL
The Australian dollar AUD=D4 rallied 1 percent to $0.9293
after bullish comments from Australia's central bank raised
speculation of an interest rate hike next month. [ID:nSYD514867]
Movements in the options market were consistent with the
Fed's view that the dollar's decline has been orderly.
One-month euro/dollar implied volatility EUR1MO= traded in
the low 10 percent region on Wednesday, edging towards the
year's low in the mid-9 percent area hit in September.
Risk reversals, which indicate how volatile a rise or fall
is likely to be, showed a move lower in the dollar is not
expected to be erratic.
Euro/dollar risk reversals EUR1MRR= were at around 0.9
percent in favour of euro puts -- the right to sell the single
currency at an agreed price at a specified time -- indicating a
rise in the euro against the dollar would be perceived as more
orderly than a fall.
Dollar/yen risk reversals favour dollar puts, but not as
much as they have in past months.
For a link to a graphic on the euro/dollar and risk
reversals, click on:
For a link to a graphic on the dollar/yen and risk
reversals, click on:
(Editing by Nigel Stephenson)
(([email protected]; +44 207 542 5830; Reuters
Messaging: [email protected]))
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