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Apr-24-2008Euro Falls Versus Dollar Before German Business Confidence Data(topic overview)
CONTENTS:
- LONDON, Apr. 22, 2008 (Thomson Financial delivered by Newstex) -- The euro remained well bid as hawkish comments from European Central Bank officials overnight raised speculation the ECB might consider increasing interest rates rather than keeping them on hold. (More...)
- The dollar was little changed at 103.27 per yen. (More...)
- 'Oil and food are sucking the consumers' purses dry of available money for buying real economy products. (More...)
- The rest of the odds are for no reduction. (More...)
- In Europe, hawkish European Central Bank inflation rhetoric supported the euro after Governing Council member Klaus Liebscher said there was no reason for pessimism on euro zone growth. (More...)
- The implied yield of the three-month Euribor future for December rose 0.12 percentage point to 4.59 percent yesterday. (More...)
- European Central Bank Governing Council member Klaus Liebscher said Monday that the ECB may have to maintain rates at a six-year high to help ease inflationary pressures. (More...)
- The euro has rallied in recent months and Tuesday's peak came as European central bankers raised the prospect of higher rates to control inflation. (More...)
- Mersch said the inflation rate in the euro region will probably be higher than 3 percent until "late in the autumn'' and that there will be a "spillover effect'' into next year, according to FT Deutschland. (More...)
- Purchases of new homes, due at 10 a.m. in Washington, fell 1.7 percent to an annual rate of 580,000 in March from the prior month, according to a survey of economists by Bloomberg News. (More...)
- Europe's currency may rise to $1.65 over the next week after breaching $1.60, said Greg Anderson, a foreign exchange strategist at ABN Amro Bank NV in Chicago, in a note to clients yesterday. (More...)
- 'With economic growth expected to be broadly in line with potential, the near stabilisation of the euro area average deficit reflects a slowdown or even a reversal of consolidation efforts in some countries and a reduction of surpluses in others,' it said. (More...)
- Commenting on the fiscal consolidation efforts in euro zone countries, the report said fiscal plans indicate that the decline in the average government deficit in the region -- observed since 2004 -- will come to a halt, with the deficit marginally increasing to 0.9 percent of GDP. (More...)
- Euro-region industrial orders rose 0.6 percent in February from the previous month, boosted by aircraft and other transport equipment, the European Union's statistics office said today. (More...)
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LONDON, Apr. 22, 2008 (Thomson Financial delivered by Newstex) -- The euro remained well bid as hawkish comments from European Central Bank officials overnight raised speculation the ECB might consider increasing interest rates rather than keeping them on hold. In an interview with the Financial Times, ECB Governing Council member Yves Mersch said the central bank in June may revise upward its inflation projections, and said he is surprised analysts still hold the view that it could cut rates. Elsewhere, fellow Governing Council member Christian Noyer told RTL radio the ECB will adjust its interest rates if necessary for inflation to be brought back down to below 2 percent next year. Analysts at BNP Paribas (OOTC:BPRBF) said they are seeing 'increasing signs that the ECB is flirting with the idea of hiking interest rates'. [1] Tuesday's remarks by Yves Mersch in the Financial Times Deutschland and comments made by Christian Noyer to France's RTL radio showed the governing council of the ECB is committed get euro zone inflation back around 2 percent, below the current 3.6 percent it is at now. It effectively threw water on any hopes of a rate cut by the bank, which has kept its benchmark rate unchanged at 4 percent since June even as the U.S. Federal Reserve, Bank of England and Bank of Canada have consistently lowered their own rates. The Bank of Canada on Tuesday slashed its interest rate by half a percentage point to 3 percent. It also hinted another cut may be coming as it feels the effects of a slumping economy at its largest trading partner.[2]
"Risks to price stability have increased'' and inflation will probably "remain at high levels in coming months,'' Nicholas Garganas, who heads the Greek central bank, said at a press conference in Athens today. "Markets have expected interest-rate cuts for months, but under these conditions, for reasons that have been well explained by Mr. Trichet, interest rates couldn't fall.'' In the U.S., the Federal Reserve has lowered its benchmark rate by 3 percentage points since mid-September, taking it to 2.25 percent, after record defaults on subprime mortgages pushed the economy to the brink of a recession and drove up credit costs worldwide. The Bank of England on April 10 lowered its key rate for the third time, to 5 percent.[3]
The British pound edged up to $1.9957 from $1.9940, while the dollar declined to 103.76 Japanese yen from 104.17 yen. The dollar has been weighed down by a combination of gloomy U.S. economic data and high European inflation — fueling expectations that the U.S. Federal Reserve will continue cutting its interest rates, while the European Central Bank will leave the cost of borrowing unchanged at 4 percent. Lower interest rates can weigh on a nation's currency as traders transfer funds to countries where they can earn better returns, while higher rates are used to curb inflation.[4] NEW YORK, April 22 (Reuters) - The euro rose against the dollar on Tuesday and traded above $1.60 for the first time since its 1999 inception amid growing expectations that the European Central Bank's next move may be an interest rate hike. That followed comments from Governing Council member Yves Mersch, who said the ECB has to ask itself each month whether a rate rise is needed to control inflation.[5] The euro rose yesterday above $US1.60 for the first time as ECB governing council member Christian Noyer said policy makers will ''do what it takes'' to restrain consumer prices. Noyer later told the Wall Street Journal that interest rate ''movements can go both ways.'' He said earlier statements had been over-interpreted, according to the newspaper. 'Watering Down' ''European officials are watering down what they said yesterday about the balance of risks of the interest rate outlook,'' said Mike Moran, senior currency strategist at Standard Chartered Bank in New York. ''They are worried those hawkish comments will add greater volatility in the euro versus the dollar.'' The Group of Seven nations didn't discuss buying dollars to boost the currency at their April 11 meeting, said Canadian Finance Minister Jim Flaherty in an interview from New York on Bloomberg Television.[6]
The euro rose to $1.592, from $1.591, during afternoon trading in Europe on Tuesday, recovering from an early-morning drop to $1.58. The European Central Bank chose to ramp up its hawkish stance on inflation, with governing council member Christian Noyer even hinting in a radio interview that a hike in interest rates was still possible. "We will do what we must," Noyer was quoted as saying, explaining that the central bank would act to bring inflation down to below its 2.0% target.[7] PARIS (Reuters) - The European Central Bank will do whatever is necessary to bring inflation back below its target level of 2 percent but will keep interest rates at their current level for the moment, ECB Governing Council member Christian Noyer said on Tuesday. "Our big problem is to ensure that inflation returns below 2 percent next year," he said in an interview with RTL radio. "We will do whatever is necessary for that," he said.[8] FRANKFURT (Thomson Financial) - European Central Bank Governing Council member Yves Mersch said the ECB in June may revise upward its inflation projections and might slightly cut the growth outlook for the euro area. The ECB puts out a quarterly forecast on euro zone inflation and growth and last March, it had raised its forecasts for euro zone inflation to 2.9 percent from 2.5 percent in 2008 and 2.1 percent from 1.8 percent in 2009. 'We will probably have to slightly adjust downward our growth forecasts,' he said, adding however that he does not think the revisions will be to levels that were forecast by the International Monetary Fund. Last March, the ECB cut its forecast for 2008 GDP growth to 1.7 percent from 2.0 percent and its projection for 2009 growth to 1.8 percent from 2.1 percent. Mersch, also head of Luxembourg central bank, said he is surprised many analysts still hold the view that the ECB would cut rates.[9] In Europe, hawkish European Central Bank inflation comments supported the euro after ECB Governing Council member Klaus Liebscher said there was no reason for pessimism on euro zone growth, suggesting the ECB will maintain interest rates at a six-year high.[10]
HONG KONG, Apr. 22, 2008 (Thomson Financial delivered by Newstex) -- The U.S. dollar hovered near record lows against the euro in afternoon trading in Asia on Tuesday on speculation the European Central Bank (ECB) won't cut interest rates due to rising inflation.[11] The 15-nation currency has retreated from a record high as traders bet slowing growth will discourage the European Central Bank from raising interest rates to curb inflation at a 16-year high. The New Zealand dollar declined after the country's central bank signaled it may cut borrowing costs later this year.[12] Australian Dollar Australia's dollar rose as much as 1% to 95.41 U.S. cents, the highest since 1984, and climbed 0.9% to 98.20 yen as consumer inflation in the first quarter breached 4% for the first time in seven years. The Canadian currency dropped against its U.S. counterpart as retail sales unexpectedly fell in February, fueling speculation the central bank may cut interest rates further. The Bank of Canada lowered its key rate by a half-percentage point to 3% yesterday.[6]
NEW YORK (AP) — The euro roared to another record high Tuesday, crossing $1.60 for the first time ever after a pair of European Central Bank governors said high inflation may cause the bank to raise interest rates.[2] NEW YORK -- The dollar dropped to a new low against the euro Tuesday, as the single currency climbed above the symbolic $1.60 level on growing expectations for an increase in the European Central Bank's benchmark interest rates.[13] The 15-nation currency bought $1.5896 in late New York trading, below the high of $1.6018 it reached Tuesday after a pair of European Central Bank governors suggested that interest rates would go higher if inflation was not stemmed.[14]
LONDON - Just when it looked like the euro's recent strength was flagging early on Tuesday, the new threat of a hike in interest rates by the European Central Bank put the single European currency back on track to break the $1.60 barrier.[7]
April 22 (Bloomberg) -- The euro climbed against the dollar to within a cent of a record high after European Central Bank governing council member Christian Noyer signaled policy makers may raise interest rates.[15] The euro pierced a record high above $1.60 on Tuesday after hawkish comments from ECB Governing Council members Christian Noyer and Yves Mersch prompted investors to speculate whether the central bank's next move would be a rate hike rather than a cut. However Noyer later said the markets had read too much into his comments, the Wall Street Journal reported, and this prompted investors to pare back more aggressive long positions in the euro.[16] Demand for the European currency also fell after comments by European Central Bank Governing Council member Christian Noyer dampened speculation of further rate increases by the bank. The RBC/NTC Eurozone Purchasing Managers Index for manufacturing dropped to 50.8 in April, its lowest in nearly three years. German manufacturing activity also fell, although both German and euro zone readings for the service economy rose.[17] A member of the European Central Bank's governing council, French central bank head Christian Noyer, told the Wall Street Journal Europe Wednesday that commodity and energy prices could fall if economic activity slumped more than expected. His remark implied that that might justify an easing of rates. If an International Monetary Fund forecast for weaker growth was accurate, "then of course the downward pressure on these types of goods might be strong and we may have a totally different path of inflation," Noyer said.[18] April 23 (Bloomberg) -- European Central Bank officials are raising the prospect of interest-rate increases for the first time since the global credit squeeze began last August, stepping up their battle to keep inflation in check. Comments by policy makers including Axel Weber and Christian Noyer are forcing investors and economists into an about-face after they previously bet the bank would follow the U.S. Federal Reserve in cutting rates to shore up growth.[19] 'The problem is that the world's major central banks are facing huge dilemmas with inflation rising and growth slowing. This should keep currency pairing whippy within relatively narrow ranges,' Noonan said. He said major currencies are likely to consolidate within whippy ranges ahead of the Federal Open Market Committee (FOMC) meeting on April 30. Noonan said the meeting promised to be a major event given the speculation that the Federal Reserve was about to end its easing cycle. Ian Copsey, a senior financial analyst at Global Forex Trading, said the Fed's aggressive rate cutting in recent months had yet to stop the U.S. economic downturn though it might to be too early to judge whether this action would have its desired impact.[20]
"One of the significant drivers today, and an underlying theme in recent dollar trade, is that the market expectations are really starting to shift away from further rate cuts from the Fed and we're seeing more concern about inflation in the euro zone," said David Solin, a partner at Foreign Exchange Analytics in Essex, Conn. The dollar has been weighed down by a combination of gloomy U.S. economic data, rate cuts by the Federal Reserve and high European inflation, which has kept the ECB from reducing its own rates. Lower interest rates can weigh on a nation's currency as traders transfer funds to places where they can earn better returns, while higher rates are used to curb inflation.[21] High oil and food prices pushed inflation to a record 3.6 percent in March for the 15 countries that share the euro. That led analysts to conclude the main ECB interest rate would stay on hold at 4.0 percent even though the U.S. Federal Reserve and the Bank of England have cut their own rates to ward off an economic slump.[18]
The ECB's inflation rate stood at 3.6 percent in the year to March, way ahead of the central bank's target of around 2 percent. That stoked market talk that the ECB's next interest rate move may actually be up, prompting a sharp retreat in European issues, particularly at the front- end. Noyer told today's Wall Street Journal that he was taken out of context, with the newspaper reporting him as saying 'I would never engage in a discussion about the future path of interest rates, simply because nobody knows. This qualification helped European issues recover after yesterday's losses.[22] The euro/yen at 164.66, the dollar at 103.73. Today the governor of the Bank of France, Christian Noyer, changed course, after yesterday his remarks on a possible raise of European interest rates by the ECB drove the dollar to over 1.60 dollars. In an interview with the Wall Street Journal Noyer explained that the markets have misunderstood his words, specifying that the European Central Bank could go both ways, raising or lowering interest rates, after which the euro started falling.[23] PARIS -- A European Central Bank policy maker whose remarks helped send the euro soaring Tuesday told The Wall Street Journal that his comments -- which markets read as suggesting the ECB could be leaning toward raising interest rates -- had been overinterpreted.[24]
Inflation in the 15-nation euro region accelerated to 3.6 percent last month, the fastest in almost 16 years. ECB policy makers will have to "tolerate a stronger euro'' or raise interest rates if they want to bring inflation down, said Thomas Mayer, the London-based chief European economist at Deutsche Bank. "Is there a level of a euro where the economy falls apart?'' he said. "No, it's a gradual process.''[25] The UBS Bloomberg Constant Maturity Commodity Index, which tracks 26 raw materials, has risen 37 percent in the past year, with commodities including oil, corn and rice hitting records. The Frankfurt-based ECB on April 10 kept its key rate at a six-year high of 4 percent, and President Jean-Claude Trichet said current policy will help the bank achieve price stability. Policy makers including Weber have said they're not sure rates are high enough to contain inflation. The ECB will "monitor very closely all developments in the coming weeks and decide whether the current level of interest rates ensures we'll meet our objective'' of controlling inflation, Weber, who heads Germany's Bundesbank, said this week.[19] ECB policy makers including Axel Weber and Juergen Stark have suggested the central bank may have to raise interest rates to curb inflation, which accelerated to 3.6 percent last month, the fastest pace in almost 16 years.[26]
The contrasting stances by the world's two most important central banks helped push the euro to a record $1.60 yesterday. "They're not threatening an immediate rate hike, but the hawks are framing the debate now,'' said Nick Kounis, an economist at Fortis Bank NV in Amsterdam who expects the ECB's next step to be an increase in mid-2009. The stronger rhetoric "has been forced on them by the fact that headline inflation has surprised significantly.'' The ECB last month forecast that inflation would average about 2.9 percent this year and 2.1 percent in 2009.[19] April 23 (Bloomberg) -- The euro traded within a cent of the record against the dollar after European Central Bank officials said they'll increase interest rates from a six-year high if inflation doesn't slow.[27] LONDON (Reuters) - The euro retreated from a record high set the previous session versus the dollar on Wednesday after a European Central Bank policymaker toned down earlier hawkish comments on interest rates.[16] NEW YORK, April 22 (Reuters) - The euro traded near record highs on Tuesday as surging oil prices and hawkish comments from European Central Bank officials supported the view benchmark rates in the region are not likely to come down soon.[28]
SYDNEY (Thomson Financial) - The U.S. dollar was trading mixed mid-morning on Thursday but making further gains against the euro, which staged it sharpest fall against the greenback in three weeks overnight following weaker Euro zone data and comments by European officials casting doubt on future European Central Bank rate hikes.[20] SYDNEY (Thomson Financial) - The U.S. dollar was trading slightly higher against major currencies mid-morning on Wednesday, partially recovering from overnight losses against the euro when expectations grew that the next move by European Central Bank (ECB) may be to hike rates.[29]
The euro rose above 1.6000 U.S. dollars on Tuesday as two European Central Bank (ECB) governors indicated that the ECB might raise rates if inflation didn't subside. The dollar climbed back late Tuesday after one of the officials said that his comments had been over interpreted.[30] Further weighing on the dollar are views that the European Central Bank (ECB) may resist calls to follow the Fed in trimming rates as the euro zone area continues to battle inflation.[31]
The dollar advanced 0.5% to 103.53 yen, from 103.02. The single currency has risen 8.9% this year against the dollar on speculation inflation will discourage the European Central Bank from lowering its 4% main refinancing rate.[6] HELSINKI (Thomson Financial) - Mounting inflation pressures have lessened the likelihood of a European Central Bank interest-rate cut this year and could push policy makers to debate an increase, said ECB governing council member Erkki Liikanen.[32] 'Inflation concerns and fears that the prospects of an ECB rate cut are as remote as ever are continuing to weigh on the bond market,' said John Ratcliffe at Thomson IFR Markets, adding that shorter-dated bonds have come under heavy pressure as a result. These concerns were highlighted by ECB governing council member Yves Mersch, who said in an interview with Tuesday's Financial Times Deutschland that the central bank may revise its inflation projections up and its growth outlook down. 'At the moment, it is more likely that in June we have to adjust upward our inflation projections,' he told the paper.[33]
FRANKFURT (Thomson Financial) - European Central Bank Governing Council Member Axel Weber said the ECB will monitor 'very closely' all developments in the coming weeks and decide whether the current interest rate levels will help the bank fulfil its maintain to maintain price stability. Speaking at a seminar in Munich, Weber said the Governing Council has always stressed its top priority is to firmly anchor the medium and long-term inflationary expectations. 'Therefore we will continue to monitor very closely all developments in the next weeks and decide whether the current levels of interest rates guarantee the fulfilment of our mandate,' he added.[34] In the wake of recent hawkish comments from European Central Bank (ECB) officials and rising commodity prices, the chances of an interest rate cut in the region any time soon look increasingly slim.[33] FRANKFURT (AFP) — The ECB is holding firm on interest rates while waiting to see if global growth and commodity prices run out of steam, analysts said Wednesday following new insights from central bank policymakers.[18]
April 23 (Bloomberg) -- Growth in European service industries from airlines to financial services unexpectedly accelerated in April, lending weight to the European Central Bank's threat to raise interest rates. Royal Bank of Scotland Group Plc said a preliminary estimate of its services index rose to 51.8 from 51.6 in March.[26] April 22 (Bloomberg) -- European Central Bank council members Christian Noyer and Yves Mersch signaled the bank may have to raise interest rates to contain inflation.[3] Bank of France Governor Christian Noyer, a member of the ECB's governing council, was the latest official to suggest ECB rate increases could be on the table. On Tuesday he said the bank is prepared to raise interest rates to bring inflation below the 2% level in 2009.[13]
"Our big problem is to make sure that inflation falls back below 2 percent next year,'' the Bank of France governor said in an interview on RTL radio. "We'll do what it takes for that,'' he said, adding, "If needed, we'll move rates.'' Noyer later told the Wall Street Journal that interest rate "movements can go both ways.'' He said his earlier statements had been overinterpreted, according to the newspaper. His colleague, Bank of Greece Governor Nicholas Garganas, said at a news conference in Athens that inflation will "remain high'' in the coming months and isn't expected to fall at a "rapid pace'' in the second half.[27]
The euro rose for the first time in three days amid a growing view that the ECB is in no hurry to cut interest rates from 4.0 percent for now due to nagging inflation risks. Strauss said traders may attempt to push the euro through $1.60 this week.[10] The single European currency was supported by a growing view that the ECB is in no hurry to cut interest rates from 4.0 percent for now due to nagging inflation risks.[35]
The dollar was little changed at 103.27 per yen. The Canadian dollar declined on speculation the nation's central bank will cut its main rate to the lowest level since December 2005, to help boost the economy as exports fall to the U.S., the nation's biggest trading partner. The central bank will cut its main rate to 3 percent, according to economists in a Bloomberg News survey. The Canadian dollar, nicknamed the loonie after the image of the bird on its one-dollar coin, dropped 0.2 percent to C$1.0073 per U.S. dollar, from C$1.0054. [15] The Australian dollar fell to 94.70 U.S. cents from 94.92 cents in New York yesterday, when it reached a 24-year high of 95.41 cents, as prices of the commodities the nation exports declined. The Munich-based Ifo institute will probably say its business climate index, based on a survey of 7,000 executives, fell to 104.3 from 104.8 in March, according to the median forecast of 43 economists surveyed by Bloomberg News. "Disappointing economic data out of Europe will surely lead to euro selling,'' said Tokichi Ito, deputy general manager of foreign exchange in Tokyo at Trust & Custody Services Bank Ltd. "It lends weight to the argument that the currency's gains are having a negative impact on the economy.'' The euro may fall to $1.58 today, he said.[12] The 15-nation currency, which was introduced in 1999, has traded as low as 82 cents. It has surged recently, rising 20 cents against the dollar in just five months and 10 cents in just two months. The euro hit its last record of $1.5982 Thursday. It dropped back Friday after a Wall Street rally generated optimism that the worst of the U.S. credit crunch may be over, but the euro rose again Monday when Bank of America's first-quarter earnings fell short of expectations. The dollar's slump is a boon for U.S. companies that rely heavily on exports, but it's the bane of travelers as worldwide inflation rises, air fares climb and prices rise in dollar terms for everything from beer in Munich to fine wine in Paris to gondola rides in Venice.[2] Markets have hoped that the bank would lower rates much like the U.S. Federal Reserve Bank, Bank of England and Bank of Canada have done. The euro hit its last record of $1.5982 Thursday but dropped back after a Wall Street rally generated optimism that the worst of the U.S. credit crunch may be over. The euro was rejuvenated this week Bank of Americas first-quarter earnings fell short of expectations. More concerns about the health of the U.S. economy came Tuesday after the National Association of Realtors reported that sales of existing single-family homes and condominiums dropped by 2 percent in March, the seventh such drop in the past eight months.[14]
'The hawkish comments are supporting the euro,' said Tomoko Fujii, head of economic strategy at Bank of America (NYSE:BAC) in Tokyo. 'Interest rate expectations dominate the currency market.' While the ECB may maintain its monetary policy, the Federal Reserve is widely anticipated to further trim its key rates to ease tight credit markets and boost the world's largest economy. The Fed may slash rates by 25 basis points this month and by another half percentage point or a quarter point each in June and in August, Fujii said. At 1:00 p.m. (0500 GMT), the euro was trading at $1.5915, near its all-time high of $1.5983 recorded on April 20, and was little changed from $1.5914 in Sydney this morning.[11] The contracts settle to the three-month inter-bank offered rate for the euro, which averaged 18 basis points more than the ECB's benchmark rate from 1999 until August. The Federal Reserve has lowered its overnight lending rate between banks by 3 percentage points since September to 2.25 percent to avoid a recession. Futures on the Chicago Board of Trade show an 82 percent chance the U.S. central bank will cut its benchmark by a quarter-point on April 30.[12] The U.S. central bank has lowered the main lending target rate 3 percentage points since September to 2.25 percent to prevent the economy from tipping into a recession. The ECB has kept its benchmark unchanged at 4 percent since June. Futures on the Chicago Board of Trade show the odds of the Fed cutting its target rate by a quarter-percentage point are 88 percent.[15]
Eonia swap contracts, a widely used market gauge of interest- rate expectations, rose to 4.1 percent yesterday, up from around 3.2 percent in mid-March. "The market is starting to quickly re-price its rate expectations as it realizes it was wishful thinking to have thought the ECB would follow the Fed in cutting,'' said Guillaume Menuet, an economist at Merrill Lynch & Co. in London, who predicts the ECB will leave its key rate unchanged through 2009. The Fed has lowered its benchmark rate by 3 percentage points since mid-September, taking it to 2.25 percent, as the U.S. economy teetered on the brink of a recession. The Bank of England on April 10 pared its key rate for the third time, to 5 percent. The Bank of Canada yesterday lowered its benchmark rate by half a point to 3 percent.[19]
Eurozone interest rates have stayed at 4.00% since last June, while the United States Federal Reserve has slashed American rates to 2.25% in a bid to revive the flagging economy. It is this interest-rate differential that could take the euro past the $1.60 barrier, and even $1.65, according to Global Insight's chief European economist, Howard Archer. "At the same time," he told Forbes.com, "the dollar remains under pressure from concerns over the U.S. economy and likely further Fed cuts."[7] The euro has hit a record peak against the U.S. dollar on expectations of higher interest rates in the euro zone. It rose as high as $1.6019 as weak U.S. housing market data underscored fears over the health of the U.S. economy.[36]
"Bank of America's results obviously don't help the dollar and we also have the ECB making comments suggesting rates may remain steady." The euro zone single currency rose to a record $1.5983 on April 17, its highest since its inception in 1999, according to Reuters data.[10]
NEW YORK (Reuters) - The euro had its biggest drop against the U.S. dollar in three weeks on Wednesday as soft economic data and comment from European policy-makers indicated the weaker U.S. currency is hurting euro zone economic growth.[37] "Interest rate differentials are really favouring the euro right now," said Camilla Sutton, a currency strategist at Scotia Capital in Toronto. That followed similar comments from fellow governing council member Yves Mersch. While the strong euro may be good news for many savers and investors, it poses problems for European exporters because it makes their products more expensive in the United States, a key sales market. Airbus announced a rise in prices across its range of aircraft, blaming high metals prices and the weakness of the U.S. dollar.[36] Rising inflation stemming from soaring food and energy prices came firmly into view as U.S. crude oil hit a historic high, topping the $118 per barrel mark CLc1. This gave added impetus to inflation-busting talk from ECB policymakers, determined to contain the impact of rising prices. That followed comments from Governing Council member Yves Mersch, who said the ECB has to ask itself each month whether a rate rise is needed to control inflation. "We have been hammered by hawkish comments from ECB members overnight and during the past week, aggressive comments suggesting that not only is the ECB planning to leave rates on hold, but they are also actively considering raising rates to stamp on inflation," said Teis Knuthsen, head of FX research at Danske Markets in Copenhagen. "That puts a certain perspective on the relative economic stance between the U.S. and the euro area," he added.[38] Overnight, the euro traded to a fresh all-time high above $1.6000 at $1.6020 after another round of hawkish comments from ECB officials and a report saying that the ECB bias has turned more hawkish and may be forced to tighten again. The officials highlighted that lowering inflation remains their number one aim, despite the slowing growth in the region and financial market turmoil. These events were followed by another weak U.S. housing number for March and comments from Federal Reserve member Richard Fischer saying that he saw a prolonged period of anemic growth.[29]
The 15-nation currency surpassed $1.60 yesterday as oil surged above $119 a barrel and Federal Reserve Bank of Dallas President Richard Fisher said inflation is starting to grip U.S. consumers. South Africa's rand appreciated against all of the major currencies on bets rising consumer prices will force the central bank to increase its target lending rate.[27] Noonan said the Australian dollar continues to be well supported after hitting a 24-year high on Wednesday after the release of higher-than-expected first quarter inflation data increased chances of the central bank remaining on a tightening bias. He said Australia's central bank appeared to be on a divergent path from the central banks of New Zealand and Canada. The Reserve Bank of New Zealand kept its official cash rate at 8.25 percent this morning but the central bank's governor Alan Bollard acknowledged that economic activity had slowed more than the bank expected.[20] In remarks on the most recent Bank of England vote to lower interest rates, Jonathan Loynes of Capital Economics noted that some policymakers in Britain were "prepared to think more about the implications of the weakening activity outlook for inflation further ahead." Central banks typically expect monetary policy decisions to have their full effect about 12 to 18 months after they are announced. Developments such as recent German wage raises could push eurozone inflation upwards in the coming months, and the bottom line, said Holger Schmieding at Bank of America, was that "many at the ECB are very concerned about their inflation-fighting credentials."[18] Any change to the banks rule book would require unanimous agreement. During his election campaign Berlusconi laid much of the blame for his countrys economic difficulties on the ECB. "It is clear that something is not right in the interest rate policy of the European Central Bank," Berlusconi said in an interview with Panorama, a magazine owned by his Fininvestcompany.[39]
Higher interest rates make bank deposits and other euro-denominated investments more attractive. Most other central banks are cutting the cost of borrowing as they look to limit the impact of a global economic slowdown.[36]
A minimum bid rate of 4.00 percent applies at the refi. The ECB said it calculates that it would need to allot 151.5 billion euros at the refi for banks to be able to fulfil their minimum reserve requirements over the next week. This 'benchmark' allotment figure takes account of banks' current account holdings with national central banks and liquidity needs arising from autonomous factors such as tax payments. The ECB may also take account of other factors in its allotment decision, which will be announced Tuesday.[40] 'On Friday the consensus was that the Fed was just about done easing and the ECB might have to start easing some time later in 2008. This morning the popular view is that the ECB might have to hike one more time and the Fed might not be finished after they ease 25 basis points next week,' Noonan said. He said regional central banks are continuing to buy the euro on dips against the dollar, which makes those holding long euro positions that much safer.[29] The Canadian dollar declined before a central bank meeting forecast to end with a half-percentage point cut in the benchmark rate. "In this environment the rhetoric from the ECB, especially the hardliners, remains strong and the market's taking that on board,'' said Jeremy Stretch, a senior market strategist in London at Rabobank International, the third-largest Dutch bank.[15]
Sylvain Broyer at the Natixis brokerage said: "Should the oil price fall by 20 percent in the third quarter as we still expect," it could trim eurozone inflation by a full percentage point. That view was at odds with comments by Yves Mersch, head of Luxembourg's central bank and another ECB governor.[18] South Africa's rand rose against all of the major currencies yesterday on bets inflation will force the central bank to raise borrowing costs, increasing the currency's interest-rate advantage. The Pretoria-based bank lifted its lending target for a fifth time in 10 months on April 10, increasing it a half- percentage point to a five-year high of 11.5 percent.[27]
April 22 (Bloomberg) -- European Central Bank policy maker Yves Mersch has doubts about whether inflation will slow to just under 2 percent in 2009 as the bank forecasts, Financial Times Deutschland reported.[41] Luxembourg central banker Mersch said the question of whether the ECB should raise rates is a valid one, the Financial Times Deutschland reported, citing an interview. The Frankfurt-based ECB on April 10 kept its key rate at a six-year high of 4 percent and President Jean-Claude Trichet said current policy will help the bank achieve price stability. Policy makers including Axel Weber and Juergen Stark have said they're not sure rates are high enough to contain inflation, which accelerated to 3.6 percent last month.[3]
The primary objective of the ECBs monetary policy is to maintain price stability and the bank aims at inflation rates of below, but close to, 2 percent over the medium term.[39]
The ECB is concerned that faster inflation will feed into wage demands, triggering a wage-price spiral. "We're warning all companies and executives of the euro area that they mustn't move wages and margins as if inflation were to stay at 3.5 percent,'' Noyer said. "They must adjust to our target of less than 2 percent, which is the level at which I hope French prices will fall back around the end of the year, and euro zone prices during next year.'' The French government target for economic growth of 1.7 percent to 2 percent for this year is "maybe a bit optimistic,'' Noyer said.[42] The target lending rate will be increased by a quarter-percentage point to 5.5 percent, according to all but one of the 24 economists surveyed by Bloomberg News. The euro has surged 1.2 percent in April and 9.5 percent this year against the dollar on speculation inflation will discourage the ECB from lowering its 4 percent main refinancing rate.[27] "On the consumer side we are still seeing quite strong employment growth and wage growth is accelerating quite strongly,'' said Nick Kounis, an economist at Fortis Bank in Amsterdam. The euro has gained 9 percent against the dollar this year as the rate gap between the U.S. and Europe widens.[26] The cost of borrowing euros for three months has surged the most in four months, with the Euribor rate increasing to 4.82 percent yesterday compared with 4.37 percent on Feb. 22, the European Banking Federation said. Growth in Europe's manufacturing activity slowed more than forecast in April, while a gauge of growth in services industries such as banking and telecommunications unexpectedly rose. The International Monetary Fund estimates growth in the 15- nation euro region will slow to 1.4 percent this year from 2.6 percent in 2007.[19]
The currency reached a record $1.60 yesterday. It initially rose on the PMI report before settling at $1.5966 at 12:30 a.m. in Frankfurt. Exports from Germany, Europe's largest economy, will grow 5 percent this year, the BGA industry group said today, maintained its sales forecast in spite of the euro's gains.[26] "The market is giving some credibility to Noyer backing off hawkish comments, it seems there's more sensitivity to interest rates," said Adam Cole, global head of currency strategy at RBC Capital Markets. The euro is up more than 9 percent this year and its breach of $1.60 prompted chairman of the Eurogroup of finance ministers Jean-Claude Juncker to say the euro's exchange rate is excessively volatile, which also prompted a slight dip in the euro.[43] The euro also edged lower to 164.50 yen, off a four-month high of 164.95 yen hit on Tuesday. The euro is up more than 9 percent this year and its breach of $1.60 prompted chairman of the Eurogroup of finance ministers Jean-Claude Juncker to say the euro's exchange rate is excessively volatile, which also prompted a slight dip in the euro.[16]
'Oil and food are sucking the consumers' purses dry of available money for buying real economy products. It doesn't matter what interest rates do,' Copsey said. He said the market may make noise about the new historic highs in the euro but ignore the fact that the dollar is performing modestly well against the other European currencies and the yen. 'It's not yet clear whether the euro has found its high for the year or not but it really doesn't look far away,' Copsey said. He said there was going to be a deterioration in the Euro-zone economy and sooner or later the euro would suffer because of that. [20] Germany's Ver.di union last month negotiated a settlement for as many as 2.1 million public-sector staff that it said was worth 8.9 percent over two years. The German chemical-workers' union last week settled a new contract that raises wages 4.4 percent this year and another 3.3 percent in 2009. "It would be very challenging for the ECB to lower interest rates, particularly in the months ahead,'' said Julian Callow, chief European economist at Barclays Capital in London. "As for rate increases, they can't be ruled out.''[19] "There is a risk that the current, temporarily high annual inflation rates, which may persist for a rather protracted period of time, could have second-round effects on wage and price- setting,'' ECB Vice President Lucas Papademos told the European Parliament in Strasbourg late yesterday. The ECB currently predicts inflation will average about 2.9 percent this year and 2.1 percent in 2009.[3]
The Australian currency rose to a 24-year high against the dollar after a government report showed inflation accelerated above 4% for the first time in seven years. ''European policy makers are trying to calibrate their policy and their words to ease the euro down,'' said Jeff Gladstein, global head of foreign-exchange trading at AIG Financial Products in Wilton, Connecticut. ''It's really a dangerous level to sell the dollar.''[6] The dollar slid toward a new low Monday against the euro after Bank of America Corp. reported worse-than-expected first-quarter earnings. The 15-nation currency rose as high as $1.5946 in afternoon European trading, up from S$1.5805 in New York late Friday and not far off its all-time high of $1.5982 reached last Thursday.[44] In late trading in New York, the euro was down 0.6 percent at $1.5893, after falling as low as $1.5862 earlier. The European currency traded at a record $1.6019 on Tuesday, according to Reuters Dealing 3000, the highest level since its inception in 1999.[37]
The Canadian dollar fell 0.9% to 98.35 U.S. cents. The Dollar Index traded on ICE futures in New York, which tracks the U.S. currency against those of six trading partners, rose to 71.864, from 71.329 yesterday. It dropped to a record of 70.698 on March 17.[6] The New Zealand dollar weakened to 79.38 U.S. cents from 79.86 cents in New York and to 82.25 yen from 82.56 yen. The Reserve Bank of New Zealand decided to leave its benchmark rate at a record high of 8.25 percent.[12] NEW YORK, April 21 (Reuters) - The dollar fell broadly on Monday after weaker-than-expected Bank of America profits damped investors' initial optimism that companies may escape the pinch of the crisis in global credit markets. Bank of America Corp (BAC.N: Quote, Profile, Research ), the No. 2 U.S. bank, reported a fall in its first-quarter profit due to write-downs and rising credit losses. Its net income fell to $1.21 billion, or 23 cents per share.[35] The dollar perked up after a Wall Street rally on Friday generated optimism that the worst of the credit crunch may be over. That was dampened Monday as Bank of America (nyse: BAC - news - people ) said its profit fell 77 percent in the first quarter, hurt by trading losses and a $3.3 billion increase in reserves for problem loans.[44]
Britain's pound drifted lower against the dollar to $1.9803 from $1.9952 in late New York trading Tuesday after minutes from the Bank of England's last Monetary Policy Committee meeting showed concern about inflation there in the face of a weaker pound and higher utility and food costs.[21] At 10:50 a.m. (0050 GMT), the dollar was trading at 103.37 yen from 103.46 yen in late New York trade while the euro was as $1.5881 from $1.5885 in New York.[20] The dollar was at $1.5931 per euro by 10:33 a.m. in New York, from $1.5817 on April 18. It was at 103.24 yen, from 103.67.[25]
NEW YORK -- The dollar rose against its major rivals Wednesday, taking back some ground a day after the euro topped $1.60 for the first time.[21]
NEW YORK, April 23 (Reuters) - The euro retreated from a record versus the dollar on Wednesday after a fall in manufacturing activity suggested that economic growth in the euro zone is starting to slow.[17] The euro fell the most against the dollar in three weeks after Luxembourg's Finance Minister Jean- Claude Juncker signaled concern that the pace of the U.S. currency's decline will take a toll on economic growth. The 15-nation euro retreated from a record as Juncker said he didn't like ''the way things are developing'' in foreign- exchange markets and oil fell below $US118 a barrel.[6] The dollar rebounded Wednesday from a record low against the euro as weak European economic data led investors to believe Tuesday's dollar selloff was overdone. The single currency climbed Tuesday to $1.6020 -- its highest level ever -- but Wednesday fell to as low as $1.5860, hurt by a manufacturing index for the euro region that dropped to a three-year low in April.[45]
The single currency climbed as high as $1.5948 against the dollar after Bank of America reported worse-than-expected earnings for the first quarter. That left the euro just off its record at $1.5985 and not far from the symbolic $1.60 level that, if reached, could set off even more dollar-selling. It took the euro almost five months to go from a record $1.40 to $1.50, but it would be less than two months between.[46] The euro took a stab at $1.60 Monday, as a dollar rally that began last week came to a halt on weak earnings from Bank of America.[46]
HONG KONG (Thomson Financial) - The U.S. dollar weakened against the euro and the yen in afternoon Asian trade on Monday on worries that data released this week, including first-quarter results and housing figures, will add to signs the world's biggest economy may fall into a recession. Bank of America, Credit Suisse Group, Texas Instruments, Microsoft and AT&T; are some of the companies set to announce their results this week.[31] The dollar will come into focus later with the release of U.S. existing home sales, which are expected to have fallen to 4.950 million in March from 5.030 million the previous month. 'We saw a surprising rise in U.S. existing home sales last month but we suspect that this is a spike within a downtrend, not the sign of a recovery,' said Steve Barrow, chief currency strategist at Bear Stearns. (NYSE:BSC) London 0849 GMT Hong Kong 0500 GMT U.S. dollar yen 103.13 up from 103.03 Swiss franc 1.0073 down from 1.0081 Euro U.S. dollar 1.5942 up from 1.5915 pound 0.8045 up from 0.8027 yen 164.36 up from 163.91 Swiss franc 1.6062 up from 1.6040 Pound U.S. dollar 1.9815 up from 1.9812 yen 204.28 up from 204.15 Swiss franc 1.9960 down from 1.9980 Australian dollar U.S. dollar 0.9440 up from 0.9417 pound 0.4764 up from 0.4750 yen 97.34 up from 97.01 Copyright Thomson Financial News Limited 2008.[1] The dollar inched up against the Japanese currency, rising to 103.52 yen from 103.09 yen. It climbed to 1.0175 Canadian dollars from 1.0084 Canadian dollars, and gained to 1.0158 Swiss francs from 1.0028 Swiss francs. Renewed concern about the health of the U.S. economy came Tuesday after the National Association of Realtors reported that sales of existing single-family homes and condominiums dropped by 2 percent in March, the seventh such drop in the past eight months.[21]
The rest of the odds are for no reduction. The Canadian dollar weakened after the Bank of Canada cut its target lending rate to 3 percent. Policy makers said they were projecting a deeper and more protracted slowdown in the United States, Canadas biggest trading partner. [47] If the PMI continues to fall, it "reinforces the ECB's current dilemma,'' said Sebastian Wanke, an economist at Dekabank in Frankfurt. "On the one hand they are faced with high inflation rates,'' on the other "the economy is weakening.'' Investors have all but priced out the possibility of an ECB rate cut this year, futures trading shows.[3] European bonds declined after Noyer's comments, pushing the yield two-year German government notes pay over similar dated Treasuries 6 basis points wider to 168 basis points, boosting the appeal of euro-denominated assets. His colleague, Nicholas Garganas said the ECB won't reduce interest rates if inflation remains high. Inflation will "remain high'' in the coming months and isn't expected to fall at a "rapid pace'' in the second half, he said at a press conference in Athens.[15] The latest surge followed public comments by two ECB governors, who said interest rates in the euro zone could rise if mounting inflation was not curtailed.[39]
In Europe, hawkish European Central Bank inflation rhetoric supported the euro after Governing Council member Klaus Liebscher said there was no reason for pessimism on euro zone growth. [35] April 22 (Bloomberg) -- European Central Bank governing council member Christian Noyer said the bank will act to restrain consumer prices if inflation doesn't slow next year.[42] The Bank of France's Christian Noyer joined other officials from Europe yesterday in airing concerns about the faster rise in consumer prices and that the central bank will do whatever is necessary to keep a lid on inflation.[22]
Comments Noyer made a day earlier had been taken to mean that eurozone rates might have to rise to stifle inflation. His latest remarks provided insight into how the European Central Bank was mulling the possibility that a sharp easing of inflation pressures might already be in the pipeline.[18] The ECB will "move rates'' if needed to push inflation below 2 percent in 2009, Noyer, who heads France's central bank, told RTL radio today.[3] The bank aims to keep the rate just below 2 percent. Mersch said the ECB may have to raise its inflation forecasts when it publishes its next set of projections in June.[3]
Consumer prices in the 15-member euro zone rose 3.5 percent in March, the fastest clip since June 1992, and way above the ECB's 2 percent target. 'The ECB is going to stay put at least in the next two months,' said Mark Wan, chief analyst at Hang Seng Investment Services Ltd. The ECB has kept its rate unchanged at 4 percent since June, while the Fed has lowered its rates by 300 basis points since September to 2.25 percent.[11] Consumer prices in the 15-member euro zone rose to 3.5 percent in March from a year earlier, the highest since June 1992. Unlike the Fed, the ECB has maintained its rate at a six-year high since June.[31]
The implied yield of the three-month Euribor future for December rose 0.12 percentage point to 4.59 percent yesterday. It has risen 0.61 percentage point this month as traders priced in the likelihood of an interest rate increase. The ECB has held its target lending rate steady since June. [27] In the UK, gilts were soft after the minutes to the last Bank of England policy decision, when the benchmark Bank Rate was reduced a quarter point to 5.00 percent, diminished market expectations that the Monetary Policy Committee will be cutting interest rates for the second month running in May.[22] The dollar was quoted at 103.70 yen, down from 103.88 yen. The Federal Reserve is widely anticipated to further trim its key interest rates by at least 25 basis points when policymakers meet next week. Since it began easing monetary policy in September, the Fed has slashed its rates by a cumulative 300 basis points.[31] The dollar has suffered because the Federal Reserve has cut interest rates sharply in recent months.[36] The dollar may extend declines amid speculation a housing recession will spur the Federal Reserve to lower interest rates.[15]
The difference in interest rates has pushed the dollar lower against the euro, which set a new record above 1.60 dollars on Tuesday.[18] 'The rhetorical tug-of-war between some euro officials and the ECB on interest rates is making some market players cautious,' Lam said.[31] Noyer's colleague Yves Mersch of Luxembourg said the ECB will have to raise the question "every month'' whether an increase in interest rates is necessary, the Financial Times Deutschland reported yesterday, citing an interview.[19]
European Central Bank Governing Council member Klaus Liebscher said Monday that the ECB may have to maintain rates at a six-year high to help ease inflationary pressures. [11] ECB governing council member Alex Weber, who last month called for higher rates in the euro area to bring down inflation, will be holding a news conference later today.[31] The 15-nation currency strengthened against the dollar yesterday as ECB governing council member Christian Noyer said policy makers will act to restrain consumer prices if inflation doesn't slow.[27]
"Bank of America's results obviously don't help the dollar, but the comments by the ECB earlier today were very hawkish and it clearly indicates the bank is very concerned about inflation and will avoid cutting rates," said Matthew Strauss, a senior currency strategist at RBC Capital Markets in Toronto.[35]
The ECB comments reversed the brief dip that the euro saw against the dollar on Tuesday morning following news that a small German bank has run into trouble after the global financial crisis. German banking association BdB said it had transferred ownership of Duesseldorfer Hypothekenbank temporarily to its depositor guarantee fund, after which the bank will be sold to a third party.[1]
Norway's krone rose 0.8 percent to 4.9598 per dollar, close to the highest since 1980, and 0.3 percent to 7.9323 versus the euro before a meeting of the central bank today.[27] LONDON, April 22 (Reuters) - The euro rallied towards recent record highs on Tuesday as surging oil prices and hawkish rhetoric from European Central Bank policymakers overshadowed earlier concerns about the European banking sector.[38] FRANKFURT (Thomson Financial) - The European Central Bank said the outlook for both world and domestic food prices remains 'highly uncertain', with overall risks expected to be on the upside. 'Looking ahead, the outlook for both world and domestic food prices remains highly uncertain.[48] FRANKFURT (Thomson Financial) - The European Central Bank called for tenders for a seven-day main refinancing operation expiring April 30.[40] LONDON (Thomson Financial) - European government bonds remained in positive territory after a leading European Central Bank official 'clarified' remarks he made yesterday.[22]
Economists don't expect the RBA to hike rates next month if the CPI comes in around the expected level, as recent hikes to take the central bank's cash target rate to 7.25 percent are already beginning to cool domestic demand.[29] "We're currently keeping rates at 4 percent because it seems to be the appropriate level to curb prices,'' the French central banker said. It's "impossible'' that the surge of raw-material prices will continue, unless one thinks that they will rise "indefinitely'' and "ruin'' the global economy, said Noyer, who's also the Bank of France governor.[42] Noyer's comments underscore the Frankfurt-based central bank's reluctance to follow counterparts in the U.S. and U.K. to counter a slowing global economy by cutting borrowing costs.[42]
Despite the twin pressures of a strong currency and a slowing economy, the German government, long a staunch defender of central bank independence, said it categorically opposed a plea from the incoming Italian government for greater political control over the bank. During his campaign for prime minister, Silvio Berlusconi, who last week re-took the office, promised to forge an alliance with the French president, Nicolas Sarkozy, a long-time critic of the banks rigid, inflation-fighting mission.[39]
The biggest country in the 15-nation euro area, Germany, rejected fresh calls to dilute the inflation-fighting mandate of Europes central bank as a way to help rein in the soaring currency.[39] "The German standpoint has been very clear, is clear and, dare I say, will remain clear," said Thomas Mirow, the deputy finance minister of Germany. He noted that the Maastricht treaty, which established the euro, "to a large degree was inspired by the experience" of the German central bank, the Bundesbank, which had price stability at the core of its mission.[39] Copsey said central bank action around the world had failed to curb inflation with oil and food prices on the rise around the globe. He said higher prices are already having a clear impact on household spending patterns.[20] The Reserve Bank of Australia (RBA) has already signalled it expects a higher annual rise of about 4.0 percent in the headline CPI, while underlying measures of inflation will also be much greater than the 2-3 percent range the central bank aims to keep annual inflation within.[29]
The U.S. central bank has lowered the fed funds target by 3 percentage points since September to 2.25%. Futures on the Chicago Board of Trade show an 82% chance the Fed will cut its benchmark by a quarter-percentage point on April 30.[6] "The markets have only priced in a 25 basis-point cut,'' Masafumi Yamamoto, head of foreign-exchange strategy for Japan at the bank, wrote in a research note today. "This may confirm dwindling dollar-selling pressure since last week.'' The U.S. currency may move between $1.57 and $1.62 a euro this month, Yamamoto said.[12] The currency's 14-day relative strength index against the dollar, a yardstick of momentum in a two-week period, was 57.1 today, signaling the currency's upward momentum has not lost steam, Tokyo-based Hashimoto said. "The euro would remain firm around its 21-day moving average of $1.58,'' said Hashimoto at Japan's second-largest bank.[12] The dollar was down against the Japanese currency, dropping to 103.09 yen from 104.17 yen. The high euro is bound to cause more pain for European manufacturers who export cars, food, wine and other products to the United States because it means their goods are more expensive. Airbus, a unit of European Aeronautic Defense and Space Co. announced a general price increase for its aircraft of an additional $2 million per single-aisle aircraft and $4 million per wide-body long range and A380 family aircraft as of May 1, citing the high euro and the cost for raw materials.[2] The latest evidence of the strain imposed by the rising euro came from Airbus, which faces unique difficulties among European companies. Not only is its main product - aircraft - priced in dollars, but it is constrained politically from moving large portions of production out of Europe to alleviate the currency pressure. The plane maker has joint management in France and Germany and thousands of jobs in both countries. Airbus said its price increases - up to $4 million on the flagship A380 superjumbo jet - would go into effect on May 1. It cited the falling value of the dollar and the rising price of commodities like steel and aluminum used to make airplanes.[39]
LONDON, April 22 (Reuters) - The euro retreated from a record high versus the dollar on Tuesday as concerns about the European banking sector weighed on the common currency despite more hawkish rhetoric from ECB policymakers. "It moved the euro lower because so far we've seen very little stress from European banks," said Adam Myers, market strategist at Credit Suisse. "I'm a bit surprised the fall wasn't deeper. and now people will be hunting round for other institutions in a similar predicament (which if they come to light) would lead to a more significant correction for the euro."[49]
April 21 (Bloomberg) -- Traders betting on intervention by the Group of Seven nations to stem the dollar's 9 percent decline against the euro this year may be disappointed. Finance ministers are less concerned about the currency's relative value than the risks from "sharp fluctuations'' in exchange rates, their April 11 statement shows. Those swings, as measured by JPMorgan Chase & Co.' s index of implied volatility on dollar options, are abating.[25] The euro fell to $1.5848 per dollar at 1:11 p.m. in Tokyo, after dropping 0.6 percent yesterday. It reached $1.6019 on April 22, the highest level since the currency's 1999 debut.[12] If the European currency remains above that it will be poised to climb to $1.6040, which represents a 123.6 percent reversal of the euro's slide to a low of $1.5341 on March 24, from a high of $1.5903 on March 17, based on a series of numbers known as the Fibonacci sequence.[12] The common European currency was at $1.5963 per euro at 10:29 a.m. in London, from $1.5991 yesterday in New York, when it climbed to $1.6019, the highest since the currency's launch in 1999.[50] "The market has started to price in the possibility of a rate hike from the ECB,'' said Tom Fitzpatrick, global head of currency strategy at Citigroup Global Markets Inc. in New York. "Given the momentum of this trade, we will at least move up to $1.6350.''[27] The euro dropped 0.6% to $US1.5894 at 2.42pm in New York, from $US1.5991 yesterday, when it climbed to $US1.6019, the highest level since the currency's 1999 debut.[6] The 15-nation currency bought $1.5835 in morning European trading, up from $1.5805 in New York late Friday but still well short of the all-time high of $1.5982 it reached last Thursday.[4] In other New York trading, the dollar inched up against the Japanese currency, rising to 103.52 yen from 103.09 yen.[14] The euro bought 1.5896 dollars in late New York trading compared with 1.6000 dollars it bought late Tuesday.[30] The dollar edged up to 1.0084 Canadian dollars in late New York trading, from 1.0072 Canadian dollars Monday.[2] In other late New York trading, the dollar bought 1.0028 Swiss francs, down from 1.0072 francs.[2]
The U.S. durable goods orders and the new home sales reports for March have been slated for release later in the New York morning. The franc also weakened to 3-day lows against its U.S. and UK counterparts. The Swiss franc showed strength against the euro during this time.[51] The U.S. durable goods orders as well as the new home sales reports for March are expected to influence trading in the New York session.[51]
A rally on Wall Street Friday that followed upbeat U.S. earnings data "is being taken by many as a sign that the worst of the credit crunch may now be behind us," said Gary Thomson, head of sales trading at CMC Markets in London. That has prompted pressure on the euro; while the European currency has recovered some ground, "the scale of the rally does suggest there's a degree of conviction amongst traders that the U.S. may be out of the worst," Thomson said.[4] 'There is a lot of caution ahead of another week of heavy earnings releases and some economic data,' said Thomas Lam, senior treasury economist at United Overseas Bank. At 1:00 p.m. (0500 GMT), the euro was trading at $1.5826, up from $1.5808 in Sydney this morning.[31]
The British pound drifted lower to $1.9803 from $1.9952 the night before after minutes from the Bank of Englands last Monetary Policy Committee meeting showed that concern about inflation there in the face of a weaker pound and higher utility and food costs. "Certainly, inflation expectations have risen recently, while latest surveys show that companies are currently very keen to raise their prices to support their margins," said Howard Archer, chief UK and European economist at Global Insight.[14] Surging food and energy prices pushed euro-region inflation to 3.6 percent in March, the fastest pace in almost 16 years, the European Union statistics office said last week.[42] A European Union report showed last week that annual inflation rose to a 16-year high of 3.6 percent in March.[27]
Inflation increased to a 16-year high of 3.6% in March, the European Union said last week.[6]
The euro has rallied in recent months and Tuesday's peak came as European central bankers raised the prospect of higher rates to control inflation. [36] The euro's initial pull-back on Tuesday came after bad news from Germany's banking sector, when the German banking association took over a Duesseldorf lender struggling to survive the current market environment. He told Forbes.com that the Eurozone in the second half of 2008 would see a scaling back of inflation and growth, enough to prompt a much-anticipated rate cut.[7] TD Securities senior strategist Joshua Williamson said the bank sent an important message that it was concerned about the economic slowdown despite persistently high inflation, which suggested that the RBNZ might cut rates in the final quarter of 2008.[20]
Executive Board member Stark said April 15 that the bank "cannot be sure'' whether the current rate level is enough to contain inflation.[3]
The ECB defines price stability as inflation rate below but close to two percent. He said the latest round of wage deals coupled with the continuing increases of energy and food prices 'have increased risks that the inflation rate would remain at excessive levels'.[34] The ECB officials are reacting to a surge in oil and food prices, which pushed inflation to a 16-year high of 3.6 percent in March. They're concerned that faster inflation will feed into wage demands and prompt companies to pass on higher costs.[19]
"Inflation expectations may recede rapidly'' if the IMF is right, Noyer told the Wall Street Journal in an interview late yesterday. Interest-rate moves "can go both ways.'' For now, inflation expectations, as measured by French inflation-indexed bonds, are rising, going above 2.3 percent this week from 2.1 percent a month ago, and fueling the ECB's concerns about so-called second-round effects.[19] There was also a delayed reaction to comments made by ECB member Christian Noyer to the Wall Street Journal throwing some doubt on future ECB rate hikes.[20] "The market may have gotten ahead of itself betting on a rate hike by the ECB," said Omer Esiner, a market strategist at Ruesch International in Washington. "The truth is that today's economic data out of Europe was pretty disappointing and Noyer backed off from his hawkish comments.[17] Jean-Claude Juncker, the chairman of the euro zone finance ministers, said the euro's exchange rate is now excessively volatile. "The euro zone is not insulated and economic data is beginning to show that," said Omer Esiner, a market strategist at Ruesch International in Washington, D.C. "The market may have gotten ahead of itself betting on a rate hike by the ECB. The euro now is overstretched and policy-makers are making it very clear they are not satisfied with it."[37]
Euro zone manufacturing activity fell to a near three-year low, the Purchasing Managers Index showed and export orders shrank for the first time since May 2005. This indicates that the currency's strength may be starting to impact the wider economy, though the data had little impact on the euro.[16] April 24 (Bloomberg) -- The euro fell for a second day against the dollar on speculation an industry report today will show German business confidence declined in April, indicating the currency's strength is hurting Europe's biggest economy.[12]
Net income fell to $1.21 billion, or 23 cents per share. Analysts said Bank of America's results suggest the fallout from the credit crisis may not be over as some have speculated, chilling the appetite for risk as such problems were expected to continue weighing on the U.S. economy and the dollar.[10] Europe's single currency also advanced before the release of a private report economists say will show U.S. sales of previously owned homes fell in March, reinforcing speculation the Federal Reserve will keep cutting borrowing costs to shore up the economy.[15] Europe's economy is holding up even as the U.S. teeters on the brink of a recession, forcing the Federal Reserve to cut borrowing costs.[26]
'Investors remain wary about the subprime problem and the U.S. economy,' said Wan. The International Monetary Fund this month cut its 2008 growth estimate for the United States to 0.5 percent from 1.5 percent.[11] The International Monetary Fund recently cut the 2008 economic forecast for the U.S. to 0.5 percent from 1.5 percent due to the widening credit crisis arising from unpaid housing mortgages. The IMF has also not discounted the possibility that the United States may suffer a 'mild recession' this year.[31]
Siemens AG Chief Executive Officer Peter Loescher said March 4 the currency's level is "not easy'' for the company. MTU Aero Engines Holding AG, the largest independent provider of jet-engine maintenance, said this month the dollar's decline will reduce profit this year. "Since our last meeting, there have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability,'' the G-7's finance ministers and central bankers said in a statement after the talks in Washington on April 11.[25] The comments, combined with a lackluster reading on U.S. existing home sales in March, helped push the European currency through the key $1.60 level.[5] The single currency was undermined by European Union chairman Jean-Claude Juncker expressing discontent at the unprecedented rise of the euro on currency markets which saw it reach $1.60 on Tuesday.[20]
The euro's decline against the dollar accelerated as some investors who piled into the currency yesterday anticipating more gains as it surpassed $US1.60 exited trades, according to Brian Dolan, chief currency strategist at FOREX.com, a unit of online trader Gain Capital in Bedminster, New Jersey.[6] "The U.S. data is still very weak and the dollar should continue falling,'' said Marcus Hettinger, a foreign-exchange strategist in Zurich at Credit Suisse Group, one of the world's top 10 currency traders. The U.S. currency may fall to 96 yen and $1.58 in three months, he said.[15]
A weaker dollar benefits the U.S. by giving a boost to exports, which increased 2 percent to a record $151.4 billion in February, according to the Commerce Department.[25] Google Inc. said April 17 that first-quarter international sales, which jumped 55 percent, would have been $202 million lower without the benefit of a depreciating dollar. While Treasury Secretary Henry Paulson has said he is a "very strong'' supporter of a "strong dollar,'' one of his predecessors, Paul O'Neill, described that policy as "vacuous'' in a Bloomberg Television interview last week.[25] The dollar will probably have to depreciate by 1 percent for three to four consecutive days before policy makers consider intervening, said Ricardo Zulliger, who heads fixed-income, currency and commodities sales in North America at Dresdner Kleinwort.[25]
European policy makers have been wary inflation will quicken on an 82 percent surge in the fuel from a year ago.[12] Crude Oil Surge European policy makers are wary inflation will quicken on a 78% surge in crude oil from a year ago.[6]
Mersch said the inflation rate in the euro region will probably be higher than 3 percent until "late in the autumn'' and that there will be a "spillover effect'' into next year, according to FT Deutschland. [41] Asked if the prospect of inflation remaining above 2 percent in 2009 supports the case for a rate increase, Mersch replied: "The question is completely justified,'' the FTD reported today.[3] The bank aims to keep the rate of consumer-price increases just below 2 percent.[19]
The implied yield on the three-month Euribor futures contract for December fell to 4.58 percent from 4.60 percent yesterday as traders reduced bets on the likelihood of an ECB rate increase.[12] Finance ministers at the meeting in Washington expressed concern that exchange rates were fluctuating sharply. The implied yield of the three-month Euribor future for December has risen 0.61 percentage point this month to 4.60% as traders priced in the likelihood of an ECB rate increase.[6]
The balance of bets are for no reduction. Royal Bank of Scotland Group Plc, the fourth-biggest currency trader, predicted the Fed will lower rates by 0.25 percentage point this month, half its previous forecast.[12]
A 50 basis-point rate reduction by the Bank of Canada "should further drive some Canadian dollar underperformance,'' Daragh Maher, senior currency strategist in London at Calyon, the investment-banking unit of Credit Agricole SA, wrote in a client note.[15]
Noyer's comments "need to be taken seriously, it means the ECB aren't going to be cutting rates anytime soon,'' Adrian Schmidt, a senior foreign-exchange strategist at Royal Bank of Scotland Group Plc, said in an interview on Bloomberg Television.[15] Gilles Moec at Bank of America told AFP that comments by Noyer at the Bank of France nonetheless showed "he is genuinely worried about growth in the eurozone. "The second and third quarters could really be on the weak side," Moec said.[18]
The U.S. housing slump has resulted in losses and writedowns at the world's biggest financial institutions of about $290 billion so far. That's made banks reluctant to lend, pushing up the cost of credit and threatening to slow global economic growth.[26] UBS AG, the world's largest money manager, has "weathered the worst'' of the credit crisis, outgoing chairman Marcel Ospel said today. "The financial markets are also still far from normal, although the evidence suggests that we are gradually re- approaching normality,'' he said. The ECB says Europe's fundamentals are "sound'' and predicts "moderate'' economic growth this year.[26] Business confidence in Germany, Europe's largest economy, unexpectedly rose for a third month in March. "Both investment and consumption should continue to contribute to economic expansion as profitability has been sustained, credit growth remains robust and employment conditions have improved,'' ECB Vice President Lucas Papademos said this week.[26] While Europe's economy has proved relatively resilient so far, there are signs the credit squeeze will slow growth. Investor confidence in Germany, the largest of the 15 nations sharing the euro, unexpectedly plunged this month.[3]
Mersch told the Financial Times Deutschland Tuesday that a changing global economy was possibly leading to a decoupling of growth from inflation. "That would have possible consequences for monetary policy options," he said.[18] 'Inflation risks are real,' Liikanen was quoted as telling the Wall Street Journal in an interview. He acknowledged risks to euro zone growth and indicated that slower growth should eventually bring down inflation. He stressed: 'Our prime mandate is price stability.[32] Mersch said euro zone inflation 'will likely be above 3.0 percent up to late in autumn'.[9]
"Our big problem is to make sure that inflation falls back below 2 percent next year,'' Noyer said today in an interview on RTL radio. "We'll do what it takes for that,'' he said adding that "If needed we'll move rates.''[42] "If needed we'll move rates,'' France's Noyer told RTL radio yesterday. By contrast, on April 4, he said he was "absolutely certain'' inflation would drop below 2 percent at the end of 2008.[19]
The bank prefers to see annual eurozone inflation at just under 2.0 percent.[18]
"The ECB and its members seem to be really focused on fighting inflation, and that has been giving the European currency a boost after the recent drop."[28] Coming around the 10th anniversary of the creation of the European common currency, the renewed tension is a reminder that the fundamental dispute over the objective of monetary policy in Europe - which raged before the creation of the ECB - remains unresolved.[39]
The euro traded at $1.5996 at 6:11 a.m. in Tokyo, after increasing 0.5 percent yesterday, when it touched $1.6019, the highest since Europe's currency debuted in 1999.[27] The last time the G-7, which comprises the U.S., Japan, Germany, Britain, France, Italy and Canada, intervened was Sept. 22, 2000. It bought euros after that currency tumbled 27 percent from its 1999 debut.[25] "There are a lot of structural reasons for the euro not to weaken for some time,'' said Andrew Busch, a global currency strategist in Chicago at BMO Capital Markets, a unit of Bank of Montreal. "They are dying to raise interest rates.''[27] "Interest rate differentials are really favoring the euro right now," said Camilla Sutton, a currency strategist at Scotia Capital in Toronto.[28]
We are keeping interest rates at 4 percent at the moment because that seems to us the appropriate level to bring prices back."[8] At the last main refi on April 15, the weighted average interest rate on accepted bids was 4.26 percent.[40] Bids with the highest interest rates will be satisfied first and bids with successively lower interest rates will be accepted until the total liquidity to be allotted is exhausted.[40]
Purchases of new homes, due at 10 a.m. in Washington, fell 1.7 percent to an annual rate of 580,000 in March from the prior month, according to a survey of economists by Bloomberg News. [12] Implied volatility on options for the dollar fell to 11.28 percent after the G-7 meeting on April 11. It was 14.5 percent on March 17, the same level at which the G-7 stepped into the market in 1995 to influence prices.[25] "A fall in bond prices, for example, would change the picture completely. That's not what we are seeing.'' The dollar will weaken to $1.62 or $1.63 per euro this quarter even after the G-7 statement, according to Simmonds. He declined to speculate on what level might bring G-7 intervention.[25] The euro briefly topped the $1.60 level in late afternoon trading in Europe, a first.[39] The euro retreated from the $1.60 level after Euro zone performance of manufacturing index (PMI) data came in weaker than expected and Belgium's business confidence index plunged.[20]
John Noonan, a senior foreign exchange analyst at Thomson Reuters IFR Markets, said with the euro finally breaking through $1.60 overnight the market is now focused on possible intervention by the ECB.[29] John Noonan, a senior foreign exchange analyst at Thomson Reuters (NYSE:TRI) (TSX:TRI) IFR Markets, said the foreign exchange market was at a crossroads. 'The market is not yet ready to declare the weak U.S. dollar trend over and the move higher in the euro-dollar yesterday suggests that those, including myself, predicting that a top was in place just below $1.60 might have been premature,' Noonan said.[11]
BERLIN (AP) — The euro moved higher on Monday against the U.S. dollar, which pulled off all-time lows at the end of last week thanks to a rally in stocks.[4] In early deals on Thursday, the U.S. dollar advanced to a 3-day high of 1.5835 against the euro at about 9:40 pm ET. The pair closed yesterday's deals at 1.5831.[51]
Despite persistent worries about the U.S. economy, the dollar benefited as the euro dropped back.[21] For details, see. Analysts said BoA's results suggested that the fallout from the credit crisis may not not be over as some have speculated, chilling risk appetite as such problems were expected to continue weighing on the U.S. economy and the dollar.[35]
Most of the moves in the dollar came early in the New York session and, without any new U.S. data or news, the dollar's direction was set for the remainder of the day.[37] NEW YORK, April 23 (Xinhua) -- The dollar regained some ground on Wednesday, a day after hitting record low against the euro.[30] The euro traded as high as $1.5969 and was at $1.5930 as of 6:51 a.m. in New York, from $1.5912 yesterday. It climbed to a record $1.5983 on April 17.[15]
Oil climbed to $117.05 a barrel for the first time in New York, the highest since futures began trading in 1983.[25]
"The ECB is certainly not easing in the near term," said Adam Boyton, a senior foreign-exchange strategist in New York at Deutsche Bank.[47] At 11:10 a.m. (0110 GMT), the dollar was at 103.01 yen from 103.03 yen in late trade in New York.[29] The U.S. durable goods orders as well as the new home sales reports for March have been scheduled for release in the New York session.[52]
Dollar gains may be limited by speculation Commerce Department reports will show sales of new houses dropped to a 13- year low in March and growth in durable goods orders almost stalled.[12]
The three-month London interbank offered rate, or Libor, for dollars has increased to 2.92 percent, the highest since March 7.[15] "We have to keep pace with the world market price developments and secure profitable deals," said John Leahy, the sales chief at Airbus. The parent of Airbus, European Aeronautic Defense Space, has been struggling to reduce the impact of unfavorable exchange rates on its results. It also has been trying to diversify its exposure and reposition its business to shift more costs into dollars.[39] Maintaining price stability is "of paramount importance,'' European Central Bank President Jean-Claude Trichet said in Frankfurt on April 15.[25] 'The special liquidity scheme has been quickly seen by the forex market for what it is - simply another central bank initiative to add liquidity to the moribund mortgage-backed securities (MBS) market,' said Steve Pearson, chief currency strategist at Bank of Scotland Treasury.[1] John Noonan, a senior foreign exchange analyst at Thomson Reuters IFR Markets, said shifting central bank expectations continue to drive direction for currencies.[20] 'If the move is sustained it is likely to induce more verbal intervention from Eurozone officials,' Noonan said. He said, verbal intervention is unlikely to discourage the market as there was a subtle shift in central bank expectations earlier in the week.[29]
Mersch, who is president of Luxembourg's central bank, told the German business newspaper that "one can always hope for that but whether it is realistic is another question.''[41] Elsewhere, the pound remained on the backfoot before Wednesday's minutes to the Bank of England's April 10 rate-setting meeting, as market players continued to view the central bank's latest plan with scepticism to help ease credit strains faced by the banking sector with a 50 billion pound lifeline.[1]
Europe's currency may rise to $1.65 over the next week after breaching $1.60, said Greg Anderson, a foreign exchange strategist at ABN Amro Bank NV in Chicago, in a note to clients yesterday. [27] As soon as commodity prices start to drop, the ECB needs to lower rates, "not into 2009, but in the next three, six months.'' IMF Europe Director Michael Deppler said in a Bloomberg Television interview this week.[19] International Monetary Fund Europe Director Michael Deppler said yesterday the ECB may need to lower rates within six months to bolster growth.[42]
A rate cut, therefore, appeared unlikely until consumer prices come off the boil or growth takes a sudden turn for the worse.[18] 'After today's minutes we have revised down the probability of a May rate cut to 20 percent (from previously 40 percent),' said Lavinia Santovetti, analyst at Lehman Brothers (nyse: LEH - news - people ).[22]
"The hawkish camp has been suggesting that there could be a change of stance by raising doubts about the appropriateness of current rates,'' said Laurent Bilke, an economist at Lehman Brothers Holdings Inc. in London. While he still expects the ECB to lower its benchmark rate to 3.75 percent in September, he said "the risk of a longer period of unchanged rates is increasing.''[3]
Japan's benchmark Nikkei share average fell 1.1 percent.N225. Jitters about the health of European financial institutions followed fresh anxiety on the state of their rivals in the U.S. Continued.[49] European exports to the U.S. fell in 2007 for the first time in four years as the U.S. currency's decline made goods from the region more expensive for Americans.[25]
European bond prices declined after the policy-makers' comments, widening the yield advantage of German bunds over U.S. Treasuries with similar maturities, further boosting demand for the euro.[5] A decline in European bonds after Noyer's comments widened the yield advantage of two-year German government debt over Treasuries with similar maturities by 0.09 percentage point to 1.71 percentage points.[27]
The average government debt ratio in the euro area is expected to decline less rapidly in 2008, by around 1.5 percentage points, to 65.1 percent of GDP, it said.[48]
The dollar has declined 17 percent against the euro and has fallen 14 percent versus the yen in the past 12 months.[25] Currently, the dollar is trading at 1.5853 against the euro, 1.9746 versus the sterling, 103.55 against the yen and 1.0185 versus the franc.[52] April 23 (Bloomberg) -- The euro fell against the dollar and was little changed versus the yen.[50]
The euro also weakened after oil prices fell to $118 a barrel after reaching a record of $119.90 on April 22.[12] By 3:55 a.m. EDT the euro was down 0.1 percent at $1.5970, off the record peak of $1.6018 set the previous session.[16]
Should the euro's losses be limited above so-called support around $1.58, then it may reach $1.6040, according to Bank of Tokyo-Mitsubishi UFJ Ltd.[12] Earlier, the yen rose against the euro after Asian stocks declined on concern bank's credit-linked losses will widen.[15]
Increased risk aversion is being reflected in money market rates, which have risen again on a spate of losses at major U.S. banks.[15] Bank of America Corp (BAC.N: Quote, Profile, Research ), the No. 2 U.S. bank, reported a fall in first-quarter profit due to write-downs and rising credit losses.[10]
The 3-way split, the first since May 2006, had been anticipated by a number of Bank watchers though the market consensus was that eight or nine of the Monetary Policy Committee would fall in line behind governor Mervyn King's preference for a quarter point cut.[22]
'Overall, risks seem to be on the upside,' it said. The report said in 2008, total base effects from both energy and non-energy prices are expected to make substantial downward contributions to inflation developments 'of around 1.1 percentage point cumulatively in the 12 months to December 2008'. It said the impact will generally be concentrated towards the end of the year as the significant increases in energy and food prices recorded in the second-half of 2007 will drop out of the annual comparison 12 months later. 'However, the extent to which these negative base effects will also lead to lower HICP inflation hinges crucially on the absence of further shocks to oil and food prices and on the moderate evolution of the other HICP components, which in particular requires the absence of second-round effects,' it said.[48] Weber is also president of the Bundesbank. Weber said the persistently high prices in energy and food are a 'cause for concern' as continuing increases in their prices 'increasingly loosen the medium and long-term inflation expectations from their anchor'. These high prices in energy and food could also reach levels that would be above the'stability threshold' of the ECB, he added.[34]
Rising inflation stemming from soaring food and energy prices came firmly into view as U.S. crude oil hit a historic high of $119.90 CLc1.[5]
With oil at a record high, betting against intervention might prove unwise for traders, said Jim O'Neill, chief economist at Goldman Sachs Group Inc. in London. The U.S. may have consented to the change in the G-7 language because the falling dollar is pushing up the price of oil, threatening foreign investment in U.S. stocks and other assets, he said.[25] Deutsche Bank AG and UBS AG, the two biggest currency traders, say the decline in volatility means the likelihood of buying or selling currencies in concert to halt the dollar's slide has diminished even with the greenback at record lows.[25]
"The dollar started Monday on a weak note, while the euro got a lift from ECB hawkish comments," said Matthew Strauss, a currency strategist at RBC Capital Markets in Toronto.[10] The euro versus the dollar has had a correlation of 0.96 with oil over the past year, according to data compiled by Bloomberg.[6] In the clearest sign yet that the euros sharp rise against the dollar is weighing ever more heavily on some exporters, Airbus said Tuesday it would raise the price of its aircraft, which are sold in shriveling dollars.[39]
On the economic front, Japan's corporate service price index increased 0.4% on month and 0.4% on year in March, the Bank of Japan said.[52] Demand for products made to last at least three years rose 0.1 percent in March, according to a separate survey before the report at 8:30 a.m.[12] The rand rose more than 2 percent versus the South Korean won and 1.9 percent against the Canadian dollar.[27] The dollar rose to 1.0158 Swiss francs from 1.0028 Swiss francs, and rose to 103.52 Japanese yen from 103.09 Japanese yen. It rose to 1.0175 Canadian dollars from 1.0084 Canadian dollars.[30]
The euro-dollar pair closed yesterday's deals at 1.5891 and pound dollar pair at 1.9808. Against its Swiss counterpart, the U.S. currency rose to a 3-day high of 1.0197 by about 10:00 pm ET, up from yesterday's close of 1.0154.[52] New Zealand's dollar fell to 79.34 U.S. cents shortly after the monetary statement was released in Wellington from 79.87 cents immediately before the statement.[20] Sales of existing homes in the U.S. probably fell to an annual rate of 4.92 million in March, from 5.03 million the prior month, according to a Bloomberg survey.[15] Weighing on the dollar are expectations that U.S. existing home sales for March, due Tuesday, will continue to show a sluggish housing market, adding to signs the United States will slip into a recession.[11]
Noonan said, a high number might induce the market to try and take out the 0.9500 level again, with cries of 'parity' against the U.S. dollar growing louder again.[29] "The U.S. data is still very weak, and the dollar should continue falling," said Marcus Hettinger, a foreign-exchange strategist in Zurich at Credit Suisse Group.[47]
The franc also weakened to 3-day lows against its U.S. and UK counterparts. The Swiss franc showed strength against the euro during this time.[52]
The euro was trading at 80.08 pence, near the record high of 80.98p hit last week.[36] The euro rose after falling on news Germany's BdB banking association had taken control of Duesseldorfer Hypothekenbank (DUOGg.F: Quote, Profile, Research ) and planned to sell it after the property lender ran into problems linked to the current financial crisis.[28] The euro rose as high as $1.6018, more than a penny above the $1.5916 it bought late Monday.[2] Crude oil rose to a record $119.90 a barrel yesterday. Royal Philips Electronics NV, Europe's largest consumer electronics maker, saw first-quarter profit fall and said it will sell its loss-making North American TV division. Heidelberger Druckmaschinen AG, the world's largest maker of printing machines, missed its annual profit and sales targets.[26]
The rate on the Euribor futures contract maturing in December rose to 4.61 percent today, up from 3.31 percent on Feb. 11.[3] Purchases of previously owned homes dropped 2 percent to an annual rate of 4.93 million, from 5.03 million in February, the National Association of Realtors said Tuesday in Washington.[47]
If it weren't for the exchange rate, the ECB would have had to raise interest rates.''[25] "Traders had started pricing in the chance of an ECB rate increase. Signs of economic weakness mean traders are scaling back these expectations.''[12]
'With economic growth expected to be broadly in line with potential, the near stabilisation of the euro area average deficit reflects a slowdown or even a reversal of consolidation efforts in some countries and a reduction of surpluses in others,' it said. [48] "Manufacturing has dropped quite a bit and that has been the driver of growth in Germany. the euro is off a touch on it," said David Pais, currency strategist at Citigroup.[17]
'The limitation to pre-existing MBS means it will have little impact on lending growth going forward beyond freeing new funding to finance new lending, but banks are still struggling to source new period wholesale funding,' said Pearson.[1]
The Financial Times Deutschland reported that the Federal Association of German Banks took over Duesseldorfer Hypothekenbank AG, a German government and mortgage lender, indicating the credit crisis is spreading to Europe.[15] LONDON (Thomson Financial) - European government bonds were lower, pressured by ongoing concerns over inflation and by gains on equity markets.[33] Earlier in the day, Christian Noyer, France's central banker, told French radio network RTL, "Our big problem is to ensure that inflation returns below 2% next year.[24] In Asia today, Noonan said the big event will be the release of Australian first quarter consumer price index inflation data, to be released at 11:30 a.m. (0130 GMT).[29] The euro-zone composite purchasing managers index rose to 51.9 in April, according to a report released on Wednesday. It helped to send the euro down as economists cautioned that components of the data still showed signs that a moderate economic downturn remained in place.[30] "The euro has room to fall further,'' said Kenta Inoue, economist and currency analyst in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan's second-largest lender.[12]
"The market is giving some credibility to Noyer backing off hawkish comments, it seems there's more sensitivity to interest rates," said Adam Cole, global head of currency strategy at RBC Capital Markets.[16] The dollar fell against the Japanese currency, dropping to 103.37 yen from 104.17 yen.[44] At about 10:00 pm ET, the franc touched a 3-day low of 1.0197 against the dollar and 2.0178 versus the pound respectively, compared to yesterday's North American close of 1.0154 and 1.9977. Against the Japanese yen, the Swiss currency dropped to a 6-day low of 101.64 during this time.[52]
The G-7 last propped up the dollar in 1995, when it sank almost 20 percent in four months against the Japanese yen to a post-World War II low of 79.95 yen.[25]
Commenting on the fiscal consolidation efforts in euro zone countries, the report said fiscal plans indicate that the decline in the average government deficit in the region -- observed since 2004 -- will come to a halt, with the deficit marginally increasing to 0.9 percent of GDP. [48] The level of $1.58 represents the euro's 21-day moving average, which has been rising in the past months, and is an area where buy orders are likely to be placed.[12] The local dollar reached a 10-day high of 7.7879 by about 10:30 pm ET. The next upside target level for the Hong Kong currency is seen around 7.781.[51] Before the G-7 meeting in Washington, strategists including Stephen Jen, head of currency research at Morgan Stanley, speculated that the world's richest nations might intervene. "It's not about levels but the volatility,'' said Geoffrey Yu, a foreign-exchange strategist in Zurich at UBS. "If the dollar drops in a gradual fashion, they are unlikely to act.[25]
Euro-region industrial orders rose 0.6 percent in February from the previous month, boosted by aircraft and other transport equipment, the European Union's statistics office said today. [26]
SOURCES
1. Forex - Euro remains well bid as ECB comments bolster rate expectations
2. The Associated Press: Euro breaks through $1.60 as dollar slumps to record low
3. Bloomberg.com: Economy
4. The Associated Press: Euro moves higher against dollar
5. FOREX-Euro rallies through $1.60 as ECB eyed | Currencies | Reuters
6. Euro dips vs US dollar on growth warning | theage.com.au
7. ECB Gives Euro A Helping Hand - Forbes.com
8. ECB's Noyer-will do what is needed to cut inflation | Reuters
9. ECB's Mersch says ECB may raise euro zone inflation forecasts in June UPDATE - Forbes.com
10. FOREX-US dollar down on Bank of America results; euro up | Currencies | Reuters
11. Forex - Dollar hovers near record low vs euro on view ECB to keep rate steady
12. Bloomberg.com: Japan
13. Free Preview - WSJ.com
14. Dollar gains after record-breaking fall against the euro - International Herald Tribune
15. Bloomberg.com: Japan
16. Euro backs off record high on policymaker talk | Markets | Hot Stocks | Reuters
17. FOREX-Euro backs off record high on weak PMI, ECB talk | Markets | Markets News | Reuters
18. AFP: ECB holding rates steady in case growth runs out of steam: analysts
19. Bloomberg.com: Europe
20. Forex - U.S. dollar mixed in Sydney morning trade, gains further against euro - Forbes.com
21. Dollar gains after record-breaking fall against the euro | Chron.com - Houston Chronicle
22. European government bonds recover after Noyer backtracks - Forbes.com
23. AGI News On - EURO: CLOSES BELOW 1. 59 DOLLARS AFTER EXPLANATION ECB
24. Free Preview - WSJ.com
25. Bloomberg.com: Worldwide
26. Bloomberg.com: Worldwide
27. Bloomberg.com: Worldwide
28. FOREX-Euro trades near record high on rate view | Currencies | Reuters
29. Forex - U.S. dollar slightly higher vs euro Sydney morning, weaker vs yen - Forbes.com
30. Dollar recovers against major currencies_English_Xinhua
31. Forex - Dollar weaker in afternoon trade in Asia ahead of more earnings, data - Forbes.com
32. Inflation pressure could push ECB to discuss rate hike - Liikanen - Forbes.com
33. European government bonds lower on inflation concerns - Forbes.com
34. Weber says ECB to decide whether current rates will help control inflation - Forbes.com
35. FOREX-Dollar slips broadly as BoA results cools optimism | Markets | Markets News | Reuters
36. BBC NEWS | Business | Euro scales $1.60 for first time
37. Euro slips from record on weak data, ECB talk | Currencies | Reuters
38. FOREX-Surging oil, rate view lifts euro near record high | Currencies | Reuters
39. Euro rises above $1.60; Airbus raises its prices - International Herald Tribune
40. ECB calls main refi, says banks require 151.5 bln euros to meet reserve needs - Forbes.com
41. Bloomberg.com: Germany
42. Bloomberg.com: Economy
43. FOREX-Euro backs off record high on policymaker talk | Currencies | Reuters
44. Dollar nears record low on Bank of America write-downs - Forbes.com
45. Free Preview - WSJ.com
46. Free Preview - WSJ.com
47. Euro breaches $1.60 as ECB warns of possible rate rise - International Herald Tribune
48. ECB says outlook for food prices remains highly uncertain - Forbes.com
49. FOREX-Euro dips as banking jitters surface in Germany | Currencies | Reuters
50. Bloomberg.com: Europe
51. RTTNews - Currency Trading, Currency Market Update, Trading Opportunities, US Market Update .
52. RTTNews - Currency Trading, Currency Market Update, Trading Opportunities, US Market Update .
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