business

By Riva Froymovich


The euro fell to a one-and-a-half-week low against the dollar Monday morning as U.S. stocks declined amid fresh turmoil in the auto and financial sectors.

Risk appetite in the currency markets is also down ahead of Thursday's Group of 20 summit and European Central Bank meeting, with traders waiting to see the results.

Leaks of the draft G20 communique indicate there won't be a fresh round of coordinated stimulus spending coming from the April 2 summit, a cause for concern for the euro, whose monetary authorities have been unwilling to match U.S. efforts, according to strategists.

However, the euro was boosted very slightly from its lowest intraday levels on comments by ECB chief Jean-Claude Trichet Monday.

He told the European Parliament that the euro-zone economy has weakened since January and that there is "a high degree of uncertainty" surrounding the economic outlook. But, he said there are no significant risks for deflation and that the central bank will do what is needed to cope with the financial crisis.

Trichet also added that the central bank will achieve its medium-term objective, to keep inflation below but near 2%.

Monday morning in New York, the euro was at $1.3162 from a low of $1.3114 and from $1.3298 late Friday. The dollar was at Y96.99 from an overnight low of Y95.96 and from Y97.91 late Friday, according to EBS. The euro was at Y127.66, off a two-week low of Y126.43 Monday, and from Y130.20 Friday. The U.K. pound was at $1.4202 from $1.4286, and the dollar was at CHF1.1522 from CHF1.1438.

The Obama administration auto task force, after more than a month of analysis, suggested that the best chance for success for General Motors and Chrysler "may well require utilizing the bankruptcy code in a quick and surgical way." Using the threat of withholding more bailout money, the administration forced out General Motors Corp. Chief Executive Rick Wagoner.

The euro is under additional pressure after a monthly survey by the European Commission showed business and consumer confidence in the 16 countries that use the euro weakened to a record low in March as new orders continued to dry up and concerns about job losses mounted.

source :The Wall street journal

• 
• 
• 
• 
• 

* 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 , less than half a yen from the near three-month high of 94.94 yen touched earlier in the session, according to Reuters data.

The euro rose 0.9 percent to 120.52 yen after earlier touching a one-month high of 121.91 yen.

The yen fell 1.1 percent against the Canadian dollar , 0.9 percent against the Swiss franc and 2.7 percent against the pound , according to Reuters data.

EURO/DOLLAR CUTS GAINS

The euro erased early gains against the dollar, last trading down 0.9 percent at $1.2729 , nearer the session low of $1.2714 than the earlier 12-day peak of $1.2991.

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

• 
• 
• 
• 
•