FOREX-Dollar gains vs yen; Citi report gives a lift
* Dollar hits 3-month high vs yen of 94.94
* Euro falls vs dollar after Trichet, Fitch comments
(Recasts, updates prices, adds comment)
By Nick Olivari
NEW YORK, Feb 23 (Reuters) - The dollar rose to a near-three month high against the yen on Monday as the Japanese currency fell broadly on expectations the U.S. government could take a large stake in U.S. lender Citigroup, but stop short of nationalization.
The Wall Street Journal reported earlier in the global session that the U.S. government would take a 40 percent stake in Citigroup by converting preferred stock into common stock [ID:nHKG310337].
This eased fears the U.S. government will completely nationalize large U.S. banks while bolstering optimism it will stay more proactive in stemming a recession than other nations. The dollar and yen had been seen as the two safe haven currencies, but Monday's news made the dollar more attractive.
The Treasury Department, Federal Reserve and three other federal agencies said in a joint statement they will initiate a program on Wednesday to assess large U.S. banks' capital needs and determine whether a bigger buffer is warranted. [IO:nWEQ000701].
The U.S. agencies insisted they did not want to nationalize banks as investors fretted over how struggling firms will cope with rising recession-driven losses. The euro surrendered early gains against the dollar after European Central Bank president Jean-Claude Trichet said the euro-zone financial system is under severe strain and Fitch voiced concern about Austria's AAA rating. For details, see [ID:nLN456587] and [ID:nLN487356].
"The constant intervention is worrisome but a necessary step to take at this part in the financial crisis," said Andrew Bekoff, Chief Investment Officer, LPB Capital LLC, a Doylestown, Pennsylvania-based wealth management firm. "The dollar is nearing a retest of its November highs."
Midway through the New York session, the dollar was up 1.6 percent at 94.63 yen
The euro rose 0.9 percent to 120.52 yen
The yen fell 1.1 percent against the Canadian dollar
EURO/DOLLAR CUTS GAINS
The euro erased early gains against the dollar, last trading down 0.9 percent at $1.2729
Analysts said Trichet's comments brought back into focus the economic and banking woes in the euro zone, while the Fitch comments highlighted the problems facing some of the countries on the region's periphery.
"I was surprised how strong the euro was right at the start of the European session on the Citigroup news. This is potentially just based on reports so far," said Chris Turner, head of forex strategy at ING in London. Traders said investors were wary of more bad news emerging about the euro-zone economy, with the closely watched Ifo index on the German economic climate due on Tuesday.
Analysts also noted disappointment that the weekend's meeting of European leaders, who were crafting a joint approach to an April G20 meeting, failed to yield any concrete agreement on ways to deal with the recession [ID:nLM126747].
"There was disappointment that the main focus of the G20 meeting was on financial market regulation, which is not the most important problem at a time of global recession," said Commerzbank head of FX research Ulrich Leuchtmann in Frankfurt. (Additional reporting by Jessica Mortimer in London, Editing by Chizu Nomiyama)
source : Reuters UK
