CURRENCIES: Financial Worries Give Dollar Modest Lift

Mon, May 11 2009, 18:32 GMT
http://www.djnewswires.com/eu
By William L. Watts
The dollar rose Monday versus most major rivals, regaining a small chunk of last week's losses as equities slipped and investors weighed their appetite for continued buying of assets perceived as more risky. The greenback fell through important support levels last week, however, and strategists cautioned that the dollar may have further to fall on ideas the global economy is beginning to bottom out. The dollar index (DXY), a measure of the greenback against a trade-weighted basket of major rivals, rose to 82.680 after falling Friday to a four-month low below 82.50. The dollar fell 0.9% versus the Japanese currency to 97.53 yen. "Today we have seen some profit taking after strong moves leading into the [New York] close ... The move does not appear to be news driven, but more simply a rest after Friday," wrote Camilla Sutton, a currency strategist at Scotia Bank in Toronto. The dollar and the Japanese yen have tended to gain ground during periods of financial and economic uncertainty, often rallying as world equity markets fall. U.S. stocks posted a broad-based retreat at the opening bell, then trimmed initial losses while European markets remained in negative territory. Worries about the financial sector follow a report in The Wall Street Journal that said U.S. banks received concessions from the U.S. Federal Reserve regarding government demands for fresh capital infusions. Fed Chairman Ben Bernanke is scheduled to deliver a speech on the recent bank stress tests late Monday. Results from HSBC Holdings also contributed to unease over riskier assets, wrote strategists at CIBC. Europe's biggest bank said that excluding the gains, which were due to a fall in the market value of its own debt, underlying pretax profit was down compared to a year ago. The bank also said that the price of its debt rebounded in April, meaning much of the benefit it recorded in the first quarter will be reversed in the second quarter. Meanwhile, the euro tracked falling European shares to lose 0.4% versus the dollar to $1.3589. But strategists noted that the euro and several other currencies broke through important resistance at their 200-day moving averages versus the dollar on Friday. "This is an important milestone and foreshadows that even if there are pull backs there is renewed downward pressure on the U.S. dollar," Sutton said. For the euro, that could set the stage for a test of the $1.3750 high, established after the Fed announced the start of its quantitative easing program, in the near term, said Christian Lawrence, a foreign-exchange strategist at RBC Capital Markets. Meanwhile, March industrial production data for France and Italy released on Monday showed larger-than-expected declines, reinforcing expectations for a steep drop in first-quarter euro-zone gross domestic product. France's statistical agency said production fell 1.4% in March, to leave output 16.1% below the level seen in March 2008. Italian industrial production dropped 4.6% for an annual fall of 23.8%. "The upshot is that the euro-zone economy will contract much more sharply this year than the consensus forecast of 3.4%, probably to the tune of 5%," said Daniele Antonucci, European economist at Capital Economics. Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=rZCMrES36KADT2R4MArh5g%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
May 11, 2009 14:32 ET (18:32 GMT)
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