Thursday May 3, 2007 - 11:18:17 GMT
Share This Story
Reuters - www.reuters.com
FOREX NEWS-Euro hits record high vs yen, dlr dips before data
FOREX-Euro hits record high vs yen, dlr dips before data
Thu May 3, 2007 7:06 AM ET
(Updates prices, adds quotes, changes byline)
By Simon Falush
LONDON, May 3 (Reuters) - The euro hit a record high versus the yen on Thursday on expectations euro zone finance ministers are unlikely to complain about the currency's strength, while the dollar dipped ahead of a U.S. services sector survey.
Sources close to the Eurogroup told Reuters on Wednesday that ministers are likely to stay calm on the euro's strength when they gather for regular talks in Brussels on Monday.
Recent upbeat data from the euro zone has reinforced expectations for a June interest rate hike from the current 3.75 percent and perhaps more later this year.
Meanwhile, strong appetite for risk led to continued yen weakness as investors exploit the carry trade, borrowing cheaply in low yielding assets like the yen to fund purchases of higher yielding assets, analysts said.
With Tokyo markets shut for a holiday and investors keenly awaiting U.S. service sector data later on Thursday and jobs data on Friday, trading on Thursday was quiet.
"Risky assets are generally outperforming and equity markets are doing well so it looks like investors are comfortable shifting to short yen positions," said Adam Cole, senior currency strategist at RBC Capital Markets.
By 1045 GMT, the euro was up slightly on the day, having risen as high as 163.62 yen earlier in the session, bringing its gains since January to more than 4 percent.
The euro was up 0.15 percent versus the dollar at $1.3607 , having hit a historic high of $1.3682 last week.
The dollar was steady on the day at 120.09 yen , after hitting a two-month high on Wednesday.
RISK APPETITE STILL HEALTHY
Japan has the lowest interest rates in the industrialised world at 0.5 percent, and investors expect euro zone interest rates to rise from 3.75 percent currently.
"We're forecasting 4.25 percent by the end of the year. With the U.S. likely having to cut, the euro can quite easily go to $1.40 by the end of the year," said Adam Myers, currency strategist at UBS.
The European Commission said on Thursday that in real effective exchange rate terms, the euro was now "just above" its long term level.
Broadly speaking, investors are still happy to borrow in low-yielding yen to buy riskier assets, including equities, and fund carry trades.
The Dow Jones industrial average <.DJI> hit a record high on Wednesday while the S&P 500 <.SPX> reached a six-year peak. Share markets in Europe and most of Asia also rallied.
"Global economic growth is strong, if not actually accelerating again, so it's no surprise that the appetite for risk is still healthy," said John Kyriakopoulos, a currency strategist at nabCapital in Sydney.
On the U.S. data front Thursday, the Institute for Supply Management's (ISM) measure on services sector activity is seen edging up to 53.0 in April from 52.4 in March. Analysts will pay close attention to the employment indicator to see if weakness in the U.S. housing sector is seeping into job losses.
The weekly jobless claims is also due, ahead of Friday's closely-watched payrolls report for April, which economists expect to show an increase of 100,000 jobs.
Investors still expect one rate cut from the Federal Reserve this year, which would take rates down to 5 percent.
Â© Reuters 2007. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.
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."