morning, with the euro extending earlier gains above $1.3150, ahead of the
Federal Open Market Committee meeting decision.
Traders appear to be getting rid of dollars ahead of the Fed announcement,
expected at 2.15 p.m. EDT Wednesday, and after the release of U.S. data that
didn't disappoint, an encouraging factor lately.
The euro rose to a fresh 7-week high of $1.3157.
The dollar also declined to a session low of Y97.73.
"It does suggest a degree of pent up demand to get rid of the dollar," said
Stuart Bennett, a senior currency strategist at Calyon in London.
Now above the $1.30 level, the euro is also benefitting from some technical
positioning. Traders likely set up trades to sell and buy above this key level.
Wednesday morning in New York, the euro was at $1.3128 from $1.3009 late
Tuesday, and the dollar was at Y97.96 from Y98.54, according to EBS. The euro
was at Y128.55 from Y128.17. The U.K. pound was at $1.3998 from $1.4041, and
the dollar was at 1.1658 Swiss francs from CHF1.1828 Tuesday.
The euro's gains escalated on the heels of an early morning advance after the
Labor Department reported U.S. consumer prices increased for a second-straight
month in February, raising the odds that the U.S. will avoid a protracted
deflationary spiral.
"Anything that indicates deflation is not around the corner is probably a
positive for markets in general, helping risk appetite," said Vassili
Serebriakov, a currency analyst at Wells Fargo.
Traders typically sell the dollar, a major funding currency, when risk
appetite rises.
The euro was already gaining after a U.K. jobs report boosted the common
currency versus the U.K. pound, gains that had cross-currency repercussions on
the dollar.
The Office for National Statistics said the U.K. jobless claimant count
jumped 138,400 in February, the biggest monthly gain since records began in
1971 and pushing unemployment above 2 million for the first time in almost 12
years.
The U.K. pound also fell because of an International Monetary Fund report
that concludes the U.K. recession will be longer and deeper than anticipated.
The IMF is expected to report later this week that the U.K. economy is set to
continue to contract well into 2010, according to the U.K. daily newspaper The
Times.
Teresa Ter-Minassian, an adviser to IMF Managing Director Dominique
Strauss-Kahn, told reporters Tuesday that the IMF now expects the U.K. economy
to contract 0.2% in 2010 after shrinking an expected 3.8% this year.
The euro rose as high as GBP0.9416.
"The real theme of March is those currencies that have been moving toward
some form of zero interest rate, or quantitative easing, have been under
significant pressure," said Jim McCormick, global head of currency strategy at
Citigroup in London, citing the U.K. pound, Swiss franc and dollar.
In addition, the dollar appears under increasing pressure this month as risk
appetite rebounds.
"This will depend importantly on what the Federal Reserve has to say...,"
said McCormick.
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