FOREX-US inflation, growth worries keep dlr under pressure

Reuters: [2008-05-19 12:41:00]

(Changes byline, updates prices, adds quotes)

By Toni Vorobyova

LONDON, May 19 (Reuters) - The dollar slipped to a 2-1/2 week low against a basket of major currencies on Monday, as the worst U.S. consumer confidence reading in nearly three decades raised concerns about stagflation.

The May Reuters/University of Michigan index of U.S. consumer confidence dropped to 59.5 on Friday, the lowest level since June 1980, while short-term inflation expectations surged to their highest in a quarter of a century [ID:nN16406494].

In contrast, analysts said that there was scope for relatively robust readings from key German sentiment surveys this week to support the euro by reinforcing the case for the European Central Bank to leave rates on hold a while longer rather than cutting them.

"For now it looks as though markets are going to continue to press the (euro's) top up towards $1.5650... but I don't think we are really going to have the momentum to break out of the current ranges," said Jeremy Stretch, strategist at Rabobank.

"Investors might be buying into the idea that the German data -- ZEW and Ifo later this week -- might be a little bit on the firmer side of expectations," Stretch said.

"And at the same time there's increasing nervousness about the inflation picture in the U.S. ... if growth remains weak and inflation is elevated then that's not a particularly comfortable place to be," he added.

The euro rose to its highest level since May 1 at $1.5632, according to Reuters data <EUR=>, before paring gains to stand at $1.5588 by 1018 GMT.

The dollar also fell as low as 72.552 against a basket of major currencies <.DXY>, its weakest in over two weeks.

The yen edged up to 103.92 per dollar <JPY=>.

The Australian dollar scaled a 24-year peak of $0.9564 <AUD=>, boosted by firm commodity prices, better risk appetite and expectations that domestic interest rates will stay high.

CENTRAL BANKS

The surprisingly steep fall in U.S. consumer confidence slightly tempered market expectations for the Federal Reserve to raise interest rates later in the year. <FEDWATCH>

U.S. short-term interest rate futures show a roughly 80 to 85 percent chance of the Fed raising rates by 0.25 percentage point to 2.25 percent by year-end. They had been fully pricing in such an increase before the consumer confidence data.

Investors will look for more clues on the outlook for U.S. monetary policy from minutes of the Federal Open Market Committee that will be released on Wednesday.

The Bank of Japan is widely expected to keep interest rates at 0.50 percent at a two-day policy meeting that starts on Monday. [ID:nT305710]

The European Central Bank's rate decision is due next week, and most analysts expect inflation worries will keep it hawkish as long as economic data holds up reasonably well.

German ZEW economic sentiment data on Tuesday, the Ifo index of German business sentiment on Wednesday and euro zone services and manufacturing PMI data on Friday.

"ZEW survey may edge higher given it is a poll of investment professionals where sentiment has likely improved alongside greater market stability, and also in the wake of Germany's impressive Q1 GDP growth," Calyon said in a note to clients.

"The greater test for euro bulls though will come later in the week when softer readings on the PMI estimates and a lower German Ifo point to a moderation in activity entering Q2."

(Editing by David Christian-Edwards) ((antonina.vorobyova@reuters.com; Tel: +44207 542 7958, Reuters Messaging: antonina.vorobyova.reuters.com@reuters.net))

Keywords: MARKETS FOREX

Currency bid prices at 1019 GMT.  All data taken from Reuters 
with percent change calculated from the daily U.S. 
close at 2130 GMT. 
 
                       Last     US Close  % Chg   YTD %   2007 
                                16 May.                   Close 
                       ----------------------------------------- 
 Euro/dlr   <EUR=>     1.5586   1.5575   +0.07    +6.83   1.4589 
 Dlr/yen    <JPY=>     103.95   104.03   -0.08    -6.63   111.33 
 Euro/yen   <EURJPY=>  162.03   162.08   -0.03    -0.31   162.53 
 Dlr/swiss  <CHF=>     1.0454   1.0474   -0.19    -7.77   1.1335 
 Stg/dlr    <GBP=>     1.9563   1.9563   +0.00    -1.43   1.9847 
 Dlr/cad    <CAD=>     0.9937   0.9990   -0.53    -0.27   0.9964 
 Aus/dlr    <AUD=>     0.9541   0.9552   -0.12    +8.95   0.8757 
 NZD/Dlr    <NZD=>     0.7745   0.7739   +0.08    +1.03   0.7666 
 Euro/swiss <EURCHF=>  1.6294   1.6320   -0.16    -1.48   1.6539 
 Euro/stg   <EURGBP=>  0.7964   0.7961   +0.04    +8.37   0.7349 
 Euro/sek   <EURSEK=>  9.3090   9.3100   -0.01    -1.29   9.4304 
 Dlr/Nok    <NOK=>     5.0148   5.0228   -0.16    -7.73   5.4347 
 Latest forex developments <FXNEWS>    
 All forex news ... [FRX]  Debt...[DBT] Indicators...[ECI] 
 Currency reports.. [USD/] [DLR/BLOC] 
                    [GBP/] [AUD/] [NZD/] [CAD/] 
 All spots  <FX=> 
 Tokyo spots <AFX=> 
 Europe spots <EFX=> 
 Volatilities <FXVOL> 
 Tokyo Forex market info from BOJ <TKYFX> 
 World central bank news [CEN] 
 Economic Forecasts...<ECON>   Official rates...[INT/RATE] 
 Forex Diary.......[MI/DIARY]   Top events........[M/DIARY] 
 Diaries...........[DIARY] Diaries Index........[IND/DIARY] 
 Press Digests....[PRESS]  Polls on G7 economies..[SURVEY/] 
 
  

FOREX-Dlr dips to 2-1/2 wk low vs euro on soft U.S. data

Reuters: [2008-05-19 10:15:00]

(Changes dateline, byline, updates prices, adds quotes)

By Simon Falush

LONDON, May 19 (Reuters) - The dollar fell to its lowest level in 2-1/2 weeks versus the euro on Monday after a slide in U.S. consumer confidence highlighted concerns about economic slowdown.

The dollar fell on Friday after the Reuters/University of Michigan index of consumer confidence underlined the threat to economic growth, dropping to 59.5 in May, the lowest level since June 1980. [ID:nN16406494]

The data, which also showed that consumers' short-term inflation expectations hit a 26-year high, eclipsed a report showing increases in construction starts for new U.S. homes and new building permits.

"The dollar is a little under pressure after the Michigan consumer confidence came in soft which, in combination with increased inflation risks, the market didn't like," said Antje Praefcke, currency strategist at Commerzbank in Frankfurt.

The euro rose to its highest level since May 1 at $1.5602 according to Reuters data <EUR=>.

The dollar was steady at 72.725 against a basket of currencies, not far off a low so far this month of 72.687 set on Friday <.DXY>.

The dollar eased 0.1 percent from late U.S. trading on Friday to 103.91 yen <JPY=>.

Settled markets and increasing risk appetite saw investors return to carrry trades in high yielding currencies. The Australian dollar briefly climbed to a 24-year peak of $0.9564 <AUD=> before turning tail to trade down 0.2 percent at $0.9532.

The surprisingly steep fall in U.S. consumer confidence slightly tempered market expectations for the Federal Reserve to raise interest rates later in the year. <FEDWATCH>

U.S. short-term interest rate futures show a roughly 80 to 85 percent chance of the Fed raising rates by 0.25 percentage point to 2.25 percent by year-end. They had been fully pricing in such an increase before the consumer confidence data.

Investors will look for more clues on the outlook for U.S. monetary policy from minutes of the Federal Open Market Committee that will be released on Wednesday.

The Bank of Japan is widely expected to keep interest rates at 0.50 percent at a two-day policy meeting that starts on Monday. [ID:nT305710]

MARKET CORRECTION

European Central Bank President Jean Claude Trichet told the BBC on Monday that the world was experiencing an "ongoing and very significant market correction", and said policymakers should make price stability their top priority [ID:nL1926285].

European data is set to be the key focus for investors this week with German ZEW economic sentiment data on Tuesday, the Ifo index of German business sentiment on Wednesday and PMI data on Friday.

"Tomorrow's ZEW survey may edge higher given it is a poll of investment professionals where sentiment has likely improved alongside greater market stability, and also in the wake of Germany's impressive Q1 GDP growth," said Calyon in a note to clients.

"The greater test for euro bulls though will come later in the week when softer readings on the PMI estimates and a lower German Ifo point to a moderation in activity entering Q2."

(Editing by Gerrard Raven) ((simon.falush@reuters.com. +44 20 7542 7681) Reuters Messaging: simon.falush.reuters.com@reuters.net))

Currency bid prices at 0812 GMT.  All data taken from Reuters 
with percent change calculated from the daily U.S. 
close at 2130 GMT. 
 
                       Last     US Close  % Chg   YTD %   2007 
                                16 May.                   Close 
                       ----------------------------------------- 
 Euro/dlr   <EUR=>     1.5603   1.5575   +0.18    +6.95   1.4589 
 Dlr/yen    <JPY=>     103.80   104.03   -0.22    -6.76   111.33 
 Euro/yen   <EURJPY=>  161.95   162.08   -0.08    -0.36   162.53 
 Dlr/swiss  <CHF=>     1.0438   1.0474   -0.34    -7.91   1.1335 
 Stg/dlr    <GBP=>     1.9590   1.9563   +0.14    -1.29   1.9847 
 Dlr/cad    <CAD=>     0.9941   0.9990   -0.49    -0.23   0.9964 
 Aus/dlr    <AUD=>     0.9551   0.9552   -0.01    +9.07   0.8757 
 NZD/Dlr    <NZD=>     0.7747   0.7739   +0.10    +1.06   0.7666 
 Euro/swiss <EURCHF=>  1.6290   1.6320   -0.18    -1.51   1.6539 
 Euro/stg   <EURGBP=>  0.7963   0.7961   +0.03    +8.35   0.7349 
 Euro/sek   <EURSEK=>  9.3020   9.3100   -0.09    -1.36   9.4304 
 Dlr/Nok    <NOK=>     5.0040   5.0228   -0.37    -7.93   5.4347 
 Latest forex developments <FXNEWS>    
 All forex news ... [FRX]  Debt...[DBT] Indicators...[ECI] 
 Currency reports.. [USD/] [DLR/BLOC] 
                    [GBP/] [AUD/] [NZD/] [CAD/] 
 All spots  <FX=> 
 Tokyo spots <AFX=> 
 Europe spots <EFX=> 
 Volatilities <FXVOL> 
 Tokyo Forex market info from BOJ <TKYFX> 
 World central bank news [CEN] 
 Economic Forecasts...<ECON>   Official rates...[INT/RATE] 
 Forex Diary.......[MI/DIARY]   Top events........[M/DIARY] 
 Diaries...........[DIARY] Diaries Index........[IND/DIARY] 
 Press Digests....[PRESS]  Polls on G7 economies..[SURVEY/] 
 
  

Euro hits 2-1/2 week high, stops triggered

Reuters: [2008-05-19 09:58:00]

LONDON, May 19 (Reuters) - The euro hit a 2-1/2 week high against the dollar on Monday in follow-through buying after the U.S. currency was undermined by soft U.S. consumer confidence data the previous session.

Traders said stop-loss levels were triggered, pushing the euro higher.

"Think they are hunting down stops above $1.56. More through $1.5610 and 20," said a London-based trader.

The euro rose as high as $1.5602 <EUR=> according to Reuters data, its highest since May 1, as Reuters/University of Michigan index of consumer confidence fell to its lowest level since 1980 the previous session keeping the greenback under pressure.

(Reporting by Toni Vorobyova and Simon Falush) ((simon.falush@reuters.com. +44 20 7542 7681) Reuters Messaging: simon.falush.reuters.com@reuters.net))

Keywords: MARKETS FOREX

FOREX-Contrasting data gives euro upper hand vs dlr

Reuters: [2008-05-16 13:13:00]

(Changes byline, updates prices, adds quotes)

By Veronica Brown

LONDON, May 16 (Reuters) - The dollar drifted down versus the euro on Friday, pressured by the contrast between Thursday's weak U.S. jobs and manufacturing data and forecast-beating growth figures from the euro zone.

The U.S. data injected a hint of doubt into market expectations that the Federal Reserve's aggressive cycle of interest rate cuts is over.

Further clues on the depth of the U.S. economic slowdown will come on Friday from April housing starts and building permits numbers at 1230 GMT and the May Reuters/University of Michigan consumer sentiment index at 1355 GMT. All three measures are seen weaker.

By contrast, Thursday's strong first-quarter growth figures from Germany and France boosted the euro as they highlighted the relative strength of the European economy compared with the United States.

The dollar also slipped versus the yen after Japanese data showed growth of 0.8 percent in the first three months of this year, above market expectations for a 0.6 percent increase [ID:nT210001].

Credit Suisse currency strategist Adam Myers said that while there were rising expectations that Europe's economy would slow, the problems in the U.S. were far from over.

"I'm very much in the camp where I think the dollar will probably weaken further from here. Europe is not going to be anywhere as badly affected with a continuing slowdown in the real economy as the U.S. is," he said.

"Europe will slow down but its slowdown is not going to have the same impact on financial markets and lending and therefore consumers than it will in the U.S."

By 1032 GMT the euro was 0.1 percent higher at $1.5470 <EUR=>. Against the yen the euro rose to 162.04 yen <EURJPY=>. The dollar was flat at 104.75 yen, having earlier fallen to 104.16.

MORE BAD NEWS?

The dollar index, which tracks the greenback's performance against a basket of major currencies was a touch weaker at 73.298, trimming earlier losses <.DXY>.

The index hit a two-month high of 73.895 last week thanks to steady gains in U.S. stocks, rising U.S. bond yields and a growing view that the worst of the credit crisis may be over.

However, the improved confidence in the U.S. economy has taken a slight knock this week with a smaller than expected rise in U.S. consumer prices.

Data on Thursday showed the number of workers claiming unemployment benefit hit a four-year high while factory activity was weak in the U.S. mid-Atlantic and in New York state [ID:nN15515443].

"(Friday's) U.S. economic news is unlikely to offer much better news; April housing starts and building permits are set to remain weak whilst Michigan confidence will fall further despite already dropping to multi-year lows," Calyon said in a note.

"The market interest to re-establish positions in EUR/USD remains limited at present. Nonetheless, weaker data today could see euro push back towards the top of the range towards $1.56."

Elsewhere, Iceland's central bank struck a deal with its counterparts in Sweden, Norway and Denmark allowing it to buy euros with Icelandic crowns, giving the island's beleaguered currency a strong boost [ID:nL16579130].

The crown surged 4.5 percent against the euro <EURISK=>.

Analysts said the bank was thought to be talking to other central banks about possible further measures.

(Reporting by Veronica Brown; Editing by Ian Jones)

((RM:veronica.brown.reuters.com@reuters.net; Tel: +44 207 542 6745))

Currency bid prices at 1057 GMT.  All data taken from Reuters 
with percent change calculated from the daily U.S. 
close at 2130 GMT. 
 
                       Last     US Close  % Chg   YTD %   2007 
                                15 May.                   Close 
                       ----------------------------------------- 
 Euro/dlr   <EUR=>     1.5456   1.5443   +0.08    +5.94   1.4589 
 Dlr/yen    <JPY=>     104.76   104.68   +0.08    -5.90   111.33 
 Euro/yen   <EURJPY=>  161.92   161.61   +0.19    -0.38   162.53 
 Dlr/swiss  <CHF=>     1.0566   1.0567   -0.01    -6.78   1.1335 
 Stg/dlr    <GBP=>     1.9476   1.9475   +0.01    -1.87   1.9847 
 Dlr/cad    <CAD=>     1.0006   0.9994   +0.12    +0.42   0.9964 
 Aus/dlr    <AUD=>     0.9447   0.9396   +0.54    +7.88   0.8757 
 NZD/Dlr    <NZD=>     0.7671   0.7628   +0.56    +0.07   0.7666 
 Euro/swiss <EURCHF=>  1.6328   1.6314   +0.09    -1.28   1.6539 
 Euro/stg   <EURGBP=>  0.7933   0.7928   +0.06    +7.95   0.7349 
 Euro/sek   <EURSEK=>  9.3370   9.3178   +0.21    -0.99   9.4304 
 Dlr/Nok    <NOK=>     5.0884   5.0931   -0.09    -6.37   5.4347 
Latest forex developments <FXNEWS>    
 All forex news ... [FRX]  Debt...[DBT] Indicators...[ECI] 
 Currency reports.. [USD/] [DLR/BLOC] 
                    [GBP/] [AUD/] [NZD/] [CAD/] 
 All spots  <FX=> 
 Tokyo spots <AFX=> 
 Europe spots <EFX=> 
 Volatilities <FXVOL> 
 Tokyo Forex market info from BOJ <TKYFX> 
 World central bank news [CEN] 
 Economic Forecasts...<ECON>   Official rates...[INT/RATE] 
 Forex Diary.......[MI/DIARY]   Top events........[M/DIARY] 
 Diaries...........[DIARY] Diaries Index........[IND/DIARY] 
 Press Digests....[PRESS]  Polls on G7 economies..[SURVEY/] 
  

Icelandic crown jumps on swap pact

Reuters: [2008-05-16 11:18:00]

LONDON, May 16 (Reuters) - The Icelandic crown jumped against the dollar and euro on Friday after Sweden's central bank said it and its Norwegian and Danish counterparts entered into a swap facility with Iceland's central bank.

By 0915 GMT, the euro was down 4.38 percent on the day at 114.98 crowns <EURISK=>, while the dollar was down 4.83 percent at 74.15 <ISK=>.

"At first glance ... this of course bound to be positive news. In and of itself it's not going to solve all the concerns. But it's a very important stepping stone in displaying that the central bank is willing and has the resources to provide support," Glitnir strategist Jon Bentsson said.

(Reporting by Veronica Brown and Toni Vorboyova)

((RM:veronica.brown.reuters.com@reuters.net; Tel: +44 207 542 6745))