Saturday April 21, 2007 - 00:19:03 GMT
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FOREX NEWS - Dollar firms vs yen, boosted by US stocks rally
FOREX-Dollar firms vs yen, boosted by US stocks rally
Fri Apr 20, 2007 4:44 PM ET
(Adds comments, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, April 20 (Reuters) - The dollar edged up against the yen on Friday and rebounded from two-year lows versus the euro as U.S. stocks gained and traders squared their positions ahead of the weekend.
A surge in Wall Street equities helped offset what is still likely to be the dollar's biggest weekly decline against a basket of major currencies so far this year.
"U.S. equities opened strongly today and it's been strong all day and that has underpinned dollar/yen," said Ron Simpson, director of currency research at Action Economics in Tampa, Florida.
Higher U.S. stock prices boost investor sentiment on the U.S. economy, giving temporary respite for the dollar, which fell to a two-year low on Thursday against a basket of currencies. <.DXY>.
In late afternoon trading, the dollar index was at 81.667, little changed on the day. On a trade-weighted basis, the dollar fell to its lowest in a decade, according to the Federal Reserve's daily broad index.
Against the yen, the dollar was up 0.2 percent at 118.71 yen .
"The dollar edged higher against the euro and I attribute that to end-of-the-week short-covering. There was nothing really driving the euro," Simpson said.
The euro in recent sessions has been boosted by the outlook for higher interest rates in coming months from the European Central Bank. The Federal Reserve, on the other hand, is widely expected to cut rates at least once this year in an effort to stimulate a slowing U.S. economy.
The single currency hit a session high of around $1.3637 , near the record high of $1.3670 set in December 2004.
But after U.S. stock market benchmark indices rallied, the euro reversed course and slid to $1.3594 in late afternoon, slightly lower on the day.
Sterling was little change against the dollar at $2.0031, after hitting a 26-year peak on Wednesday.
The euro rose 0.1 percent against the yen to 161.41 yen , having hit a record high of 162.42 this week. It pared gains against the yen after U.S. Treasury Secretary Henry Paulson on Friday said China needed to move more quickly to increase flexibility of the yuan.
Any statement from global monetary officials suggesting the need for a faster pace of appreciation in the Chinese yuan tends to benefit the yen, which is a proxy for Asian currencies in general.
Overall, traders said the euro is likely to resume its advance against the dollar and yen next week amid signs European politicians may not take action in the near term to prevent it from strengthening, traders said.
Eurogroup Chairman Jean-Claude Juncker and other finance ministers said on Friday the euro's strength was no reason to panic.
"The underlying current is still dollar weakness against European currencies," said Jeff Sakamoto, a foreign exchange dealer at Union Bank of California in Los Angeles. "The dollar has been offered all week and it may see a little bit of correction, but overall, people are looking for places to sell dollars down the line."
The dollar has suffered from expectations the Fed will cut rates at least once this year, from 5.25 percent, even though central bank officials have reiterated their main concern remains price pressures.
Federal Reserve Governor Frederic Mishkin, in remarks at Bard College on Friday, expressed concern about the persistence of inflation in the U.S. economy, but his comments drew little market reaction.
Next week, traders will be looking at the government's preliminary estimate for U.S. gross domestic product growth, some housing data and readings on consumer confidence for clues as to where the economy and interest rates are headed. (Additional reporting by Vivianne Rodrigues)
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