Monday August 27, 2012 - 21:34:58 GMT
Reuters - www.reuters.com
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FOREX NEWS - Euro lower versus dollar; Bernanke ahead
Mon Aug 27, 2012 3:47pm EDT
* Euro down from recent seven-week high in thin liquidity
* German business sentiment falls more than expected in
August
* Bernanke speaks on Friday, easing expectations could weigh
on dollar
NEW YORK, Aug 27 (Reuters) - The euro fell against the
dollar on Monday in thin trading after a bigger-than-expected
drop in German business sentiment even as it raised hopes in
some that the euro zone's largest economy will do more to revive
the bloc's growth.
Sentiment toward the euro remained uncertain as markets
awaited a series of key events next month, including the
European Central Bank's policy meeting on Sept. 6, followed by
the German Constitutional Court's ruling on the euro zone's
permanent bailout fund on Sept. 12.
A speech by Federal Reserve Chairman Ben Bernanke due on
Friday will also be keenly watched by market players for any
signs of action by the U.S. central bank to spur tepid growth.
German business sentiment dropped for a fourth straight
month in August to reach its lowest since March 2010, the
Munich-based Ifo think tank said, with the business climate hit
by increasing worries about the future level of exports.
"The news clearly shows that Germany cannot escape unharmed
if the rest of the euro zone falls into a deep recession," said
Boris Schlossberg, managing director of FX Strategy at BK Asset
Management in New York.
"Therefore policymakers may now temper their insistence on
austerity and instead will pursue more stimulative policies in
order to revive growth."
The euro hit a session high of $1.2535 on Reuters
data after the Ifo survey was released, but gradually lost
ground to trade at $1.2499, closer to the session low of
$1.2488, and down 0.1 percent on the day.
It stayed well below a peak of $1.2589 set last Thursday,
its highest since July 4. Traders cited strong offers above
$1.2580 and option barriers at $1.2600. Support lies around
$1.2500.
Volume was thin with London shut for a holiday.
Further gains in the euro are likely before U.S. Federal
Reserve Chairman Ben Bernanke speaks at a central bankers'
gathering in Jackson Hole, Wyoming, on Friday amid expectations
of another round of monetary easing from the U.S. central bank
to stimulate sluggish growth.
Chicago Federal Reserve President Charles Evans said the Fed
should immediately launch a fresh round of monetary stimulus
and buy bonds for as long as it takes to produce a steady
decline in the jobless rate.
The euro climbed 1.4 percent last week on optimism the ECB
will soon start buying Spanish and Italian bonds to bring down
borrowing costs in troubled euro zone economies.
Investors had been waiting for a speech by German ECB
Executive Board member Joerg Asmussen who said last week a Greek
exit from the euro zone was manageable but not preferable. But
his comments on Monday did little to move investors one way or
another, analysts said.
In remarks aimed at assuaging the angst of Germany's
Bundesbank, Asmussen said the European Central Bank will tailor
its new bond-buying plan to dispel any concerns that it funds
governments.
He did not say when the bank would begin buying but made
clear the plan would go ahead despite Bundesbank opposition.
[ID:nF9E8J2033}.
Underscoring challenges to a quick solution to the debt
crisis, Germany's Bundesbank has likened the ECB's bond-buying
plan to a dangerous drug and a conservative ally of the German
leader said Greece should leave the currency bloc by next year.
"There's a lot of event risk, and I think this event risk
will keep the euro capped," said Mitul Kotecha, head of global
foreign exchange strategy for Credit Agricole in Hong Kong. He
predicted the euro "will struggle to get above $1.26 this week".
Against the yen, the euro was little changed at 98.44 yen
. The dollar was up 0.1 percent at 78.74 yen.
The Australian dollar skidded to a one-month low and
looked vulnerable to further losses on fresh concerns about
China's economy. The Aussie is often used to express views on
the world's second-largest economy.
The Aussie dollar was last down 0.3 percent at $1.0373.� Thomson Reuters 2011. All rights reserved.
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