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Thursday, March 26, 2009

WORLD FOREX: Dlr Rises, Euro Mixed As Risk Appetite Improves

The dollar is mostly higher in Europe Thursday as risk
appetite improves a little and concerns about U.S. Treasury policy towards the
currency subside.

The rise in risk appetite was illustrated in a rally by the euro against the
yen, with equity markets showing some further strength.

Market sentiment was helped by data Wednesday showing that both U.S. durable
goods orders and new home orders had risen sharply, instead of continuing
their recent decline as the market had expected.

The fresh hope of economic recovery this injected into markets helped to lift
the Dow Jones Industrial Average 1.5% and then the Nikkei Index in Japan 1.9%.

However, there was some sign this sentiment was faltering, with most European
bourses starting their trading slightly in the red Thursday.

Underlying these moves is the continued debate on just what U.S. Treasury
Secretary Tim Geithner hoped to achieve by saying Wednesday he was "quite open"
to Chinese suggestions of a move towards Special Drawing Right-linked currency

The U.S. official quickly back-tracked, stating the dollar will remain the
global reserve currency for some time to come, and helped the dollar to recover
sharp losses it made on the original statement.

See chart at


However, analysts said the episode illustrated just how fragile dollar
sentiment remains to any suggestion foreign countries are in any way
considering reducing their dollar-denominated reserves.

An SDR-linked currency is likely to hold a much higher percentage of euros,
yen and sterling, rather than dollars.

The euro, meanwhile, was having a mixed day, helped by higher risk appetite
but hurt by news that German consumer confidence declined for the first time
since September 2008.

Although sterling had been doing well at the start, the release of data
showing a 1.9% drop in U.K. retail sales last month pushed it lower.

By 1020 GMT, the dollar had pushed ahead to Y98.16 from Y97.30 late Wednesday
in New York, according to EBS.

The euro was down at $1.3567 from $1.3587, but rose to Y133.24 from Y132.19.

The pound was up at $1.4567 from $1.4531, but it had been as high as $1.4633.

The dollar rose to CHF1.1263 from CHF1.1203, while the euro rose to CHF1.5285
from CHF1.5222. For the second day in a row, the euro has been pushed down
close to CHF1.5200 to see if this will trigger intervention by the Swiss
National Bank.

The Swiss central bank launched a surprise intervention exercise March 12
when the euro fell as far as CHF1.4800.

In Eastern Europe, the Hungarian forint was staging a technical bounce, with
the euro falling to HUF301.89 from HUF302.41.

The euro was also down at PLN4.5541 from PLN4.5819, but up a little at
CZK27.515 from CZK27.413.

-By Nicholas Hastings, Dow Jones Newswires; 44 20 7842 9493;
nick.hastings@dowjones.com TALK BACK: We invite readers to send us comments
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