Citic Pacific Ltd.'s (0267.HK) foreign exchange scandal pushed it to a full-year loss of HK$12.66 billion (US$1.62 billion), but the conglomerate says it will return to profitability in 2009.
"Now that we have put the issues of 2008 behind us we are focused on the future," Chairman Larry Yung told a news conference.
"Our balance sheet is solid, with debt maturity well structured in anticipation of cash flows from our businesses," Yung said. But he warned the economic slump will harm Citic Pacific's steel and property operations this year.
Although Yung sought to answer questions about the forex scandal by saying the company had moved past it, an investigation by Hong Kong's Securities and Futures Commission is still under way. Yung said he doesn't know when the probe will be completed, declining further comment.
Citic Pacific, which has power, property, aviation, ore and steel operations, said it swung to a net loss of HK$12.66 billion for the 12 months ended Dec. 31, from a restated net profit of HK$10.84 billion a year earlier.
The company's first-ever annual loss was wider than the average forecast of HK$11.69 billion in a Thomson Reuters survey of three analysts.
J.P. Morgan analyst Billy Ng said he expects Citic Pacific can return to profitability this year, though the aviation and steel businesses will remain under pressure.
"The timing of a recovery in specialty steel is uncertain, and visibilty on the iron ore project remains low," Ng said.
Citic Pacific's shares fell 8% Wednesday, closing at HK$8.96 after partially bouncing back from losses of as much as 10.2% on the day.
Citic Pacific said revenue rose 20% last year to HK$46.42 billion from HK$38.53 billion.
Citic Pacific directors won't get a bonus for 2008 because of the loss, Yung said, and shareholders won't get a dividend.
Citic Pacific disclosed Oct. 20 it faced billions of dollars in losses over what it called unauthorized forex bets by two executives who left the company. The trades were made through an arrangement known as an "accumulator" that gave Citic Pacific limited upside but unlimited downside, and they turned bad when the Australian dollar unexpectedly fell against the U.S. dollar.
Citic Pacific said Wednesday it booked realized and mark-to-market losses of HK$14.63 billion over the bets.
The conglomerate came under intense criticism after it was revealed the board found out about the trades Sept. 7, about six weeks before the disclosure.
Citic Pacific's state-owned parent, Citic Group, ended up taking over most of the currency bets in exchange for a stake in the listed unit.
The timing of the disclosure is believed to be a focus of the SFC investigation, though the SFC and Citic Pacific have declined comment on specifics.
Yung said that the 2008 loss won't force Citic Pacific to sell any assets, but weak demand for iron ore has prompted it to delay the opening of a mine in western Australia by a year, to the third quarter of 2010.
Citic Pacific, which owns 80% of the mine project, said earlier it planned to produce 27.7 million metric tons a year of a mix of ore concentrate and iron pellets. The company acquired the rights to mine 2 billion metric tons of iron ore in Western Australia's Pilbara region in 2006.
Citic Pacific said Wednesday two directors from its parent, Zhang Jijing and Ju Weimin, were named as non-executive directors of the listed company, effective April 1.
Wednesday, March 25, 2009
HK's Citic Pacific records $1.6 bln loss in 2008
HONG KONG: Citic Pacific Ltd., the Hong Kong arm of a Chinese government investment firm, said Wednesday it suffered a massive loss last year after making bad currency bets, but maintained its finances were secure.
The company reported 12.7 billion Hong Kong dollars ($1.6 billion) net loss for 2008, compared to a profit of HK$10.8 billion in 2007, the company said in a statement.
Wrongway bets in the currency market were largely to blame, costing the company HK$14.6 billion (US$1.9 billion), according to the statement.
Citic Pacific stunned investors last year when it revealed huge losses from bad bets on leveraged foreign currency contracts, prompting the company to seek a $1.5 billion bailout from its Beijing-based parent company Citic Group.
Chairman Larry Yung expected the impact of the bad currency bets to diminish and said the company would turn a profit this year.
Today in Business with Reuters
Geithner clarifies his remarks after dollar tumbles
Czech leader of EU blasts U.S. economic stimulus
I.M.F. approves Romanian rescue
"We've already put aside provisions from last year for most of the bets, so we think it will be normal profit for us," Yung said at a news conference in Hong Kong.
The vast conglomerate, whose dealings run from airlines to mining and Wal-Mart stores, also said it is "financially secure" following the bailout. However, maturing debt in the next years requires refinancing which will begin shortly, Citic Pacific said in the statement.
The company recommended against a final dividend and directors will not receive bonuses for last year, the statement said.
The company reported 12.7 billion Hong Kong dollars ($1.6 billion) net loss for 2008, compared to a profit of HK$10.8 billion in 2007, the company said in a statement.
Wrongway bets in the currency market were largely to blame, costing the company HK$14.6 billion (US$1.9 billion), according to the statement.
Citic Pacific stunned investors last year when it revealed huge losses from bad bets on leveraged foreign currency contracts, prompting the company to seek a $1.5 billion bailout from its Beijing-based parent company Citic Group.
Chairman Larry Yung expected the impact of the bad currency bets to diminish and said the company would turn a profit this year.
Today in Business with Reuters
Geithner clarifies his remarks after dollar tumbles
Czech leader of EU blasts U.S. economic stimulus
I.M.F. approves Romanian rescue
"We've already put aside provisions from last year for most of the bets, so we think it will be normal profit for us," Yung said at a news conference in Hong Kong.
The vast conglomerate, whose dealings run from airlines to mining and Wal-Mart stores, also said it is "financially secure" following the bailout. However, maturing debt in the next years requires refinancing which will begin shortly, Citic Pacific said in the statement.
The company recommended against a final dividend and directors will not receive bonuses for last year, the statement said.
CITIC Pacific posted its first annual loss in almost two decades after wrong-way bets on the Australian dollar forced it to seek a bailout from China.
et loss was $HK12.7 billion ($2.35 billion), or $HK5.68 a share, for 2008, compared with a profit of $HK10.8 billion, or $HK4.90, a year earlier, the Hong Kong-listed company said yesterday.
That compares with the $HK11.2 billion loss median estimate of five analysts surveyed by Bloomberg.
Sales rose 21 per cent to $HK46.4 billion.
Citic Pacific plunged 81 per cent in 2008, making it the second-worst performing stock on Hong Kong's benchmark index after losses on Australian dollar bets forced it to seek $US1.5 billion ($2.15 billion) of aid from state-owned parent Citic Group.
Citic Pacific said it had a $HK14.6 billion realised and marked-to-market loss after tax on foreign exchange contracts.
"What really matters now is the company's guidance on its underlying businesses, as most of them -- such as aviation and steel production -- are quite cyclical," Billy Ng, a Hong Kong-based analyst at JPMorgan Chase, said before the earnings statement.
"The exchange loss is no surprise and is reflected in the share price."
Citic Pacific, which also develops property, faces dwindling demand because of the global recession. The stock has gained 14.6 per cent this year, compared with the 3.8 per cent drop in the Hang Seng index.
Cathay Pacific, Hong Kong's biggest carrier, which is 17.5 per cent owned by Citic Pacific, on March 11 reported an annual loss of $HK8.56 billion after making wrong bets on fuel prices and as the global recession crimped travel.
Citic Pacific bought currency contracts to fund a $1.6 billion iron ore mine in Australia. The company had expected the Australian dollar would rise, and incurred losses after the currency tumbled against its US counterpart.
Citic Pacific's chairman Larry Yung and managing director Henry Fan were among 17 directors being probed by the Securities and Futures Commission, the company said on January 2. The commission did not say what the probe was about.
The board has been criticised for a six-week delay in revealing the losses by lawmakers and shareholder activist David Webb.
"Investors will need some time to rebuild their confidence in the company," said JPMorgan's Mr Ng, who recommends that investors "underweight" Citic Pacific shares.
According to Citic Pacific's website, the company was listed in 1991 after it bought a 49 per cent stake in Tylfull Company and changed names.
That compares with the $HK11.2 billion loss median estimate of five analysts surveyed by Bloomberg.
Sales rose 21 per cent to $HK46.4 billion.
Citic Pacific plunged 81 per cent in 2008, making it the second-worst performing stock on Hong Kong's benchmark index after losses on Australian dollar bets forced it to seek $US1.5 billion ($2.15 billion) of aid from state-owned parent Citic Group.
Citic Pacific said it had a $HK14.6 billion realised and marked-to-market loss after tax on foreign exchange contracts.
"What really matters now is the company's guidance on its underlying businesses, as most of them -- such as aviation and steel production -- are quite cyclical," Billy Ng, a Hong Kong-based analyst at JPMorgan Chase, said before the earnings statement.
"The exchange loss is no surprise and is reflected in the share price."
Citic Pacific, which also develops property, faces dwindling demand because of the global recession. The stock has gained 14.6 per cent this year, compared with the 3.8 per cent drop in the Hang Seng index.
Cathay Pacific, Hong Kong's biggest carrier, which is 17.5 per cent owned by Citic Pacific, on March 11 reported an annual loss of $HK8.56 billion after making wrong bets on fuel prices and as the global recession crimped travel.
Citic Pacific bought currency contracts to fund a $1.6 billion iron ore mine in Australia. The company had expected the Australian dollar would rise, and incurred losses after the currency tumbled against its US counterpart.
Citic Pacific's chairman Larry Yung and managing director Henry Fan were among 17 directors being probed by the Securities and Futures Commission, the company said on January 2. The commission did not say what the probe was about.
The board has been criticised for a six-week delay in revealing the losses by lawmakers and shareholder activist David Webb.
"Investors will need some time to rebuild their confidence in the company," said JPMorgan's Mr Ng, who recommends that investors "underweight" Citic Pacific shares.
According to Citic Pacific's website, the company was listed in 1991 after it bought a 49 per cent stake in Tylfull Company and changed names.
Citic Pacific dips into red ink on forex losses Omits final dividend, won't pay directors' bonuses; chairman sees tough 2009
HONG KONG (MarketWatch) -- Diversified conglomerate Citic Pacific said Wednesday it swung to a loss of HK$12.66 billion ($1.62 billion) in 2008 after suffering HK$14.63 billion in losses on a number of foreign exchange contracts.
The company's 2007 net income stood at HK$10.84 billion.
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CTPCY 5.81, -0.40, -6.4%) , which has interests in steel making, mining, power generation and trading, infrastructure and air-cargo services, said the board has also decided to scrap final dividend payment and not pay any bonuses to directors for 2008.
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"Our company is financially secure following the re-capitalization by the Citic Group," the company said in a statement, referring to its Chinese state-owned parent.
"Shareholders' funds stood at HK$50 billion at 31 December 2008. ... Maturing debt in the next few years requires re-financing and, considering today's environment, work on this will begin shortly," it said.
The company's revenue increased 20% to HK$46.42 bililon.
Chairman Larry Yung said Citic Pacific is facing a difficult operating environment in 2009, "which will impact this year's performance."
Still, "as we look at global economic conditions and compare the situation in China, we remain encouraged. We have sufficient resources and are well placed to capture future opportunities," Yung said.
The company's 2007 net income stood at HK$10.84 billion.
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CTPCY 5.81, -0.40, -6.4%) , which has interests in steel making, mining, power generation and trading, infrastructure and air-cargo services, said the board has also decided to scrap final dividend payment and not pay any bonuses to directors for 2008.
Chart of HK:267
"Our company is financially secure following the re-capitalization by the Citic Group," the company said in a statement, referring to its Chinese state-owned parent.
"Shareholders' funds stood at HK$50 billion at 31 December 2008. ... Maturing debt in the next few years requires re-financing and, considering today's environment, work on this will begin shortly," it said.
The company's revenue increased 20% to HK$46.42 bililon.
Chairman Larry Yung said Citic Pacific is facing a difficult operating environment in 2009, "which will impact this year's performance."
Still, "as we look at global economic conditions and compare the situation in China, we remain encouraged. We have sufficient resources and are well placed to capture future opportunities," Yung said.
US and Europe Reject Chinese Bid for New Global Currency
US and European policymakers are standing behind the dollar as the world's reserve currency. Their comments followed a Chinese bid to see the currency replaced by International Monetary Fund coinage.
An upcoming global economic summit could turn into a showdown over the dollar as the world's reserve currency.
China has publicly thrown its support behind other emerging economies such as Russia which want to shift the world's currency away from the dollar to a new currency run by the International Monetary Fund (IMF).
"The outbreak of the crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system," People's Bank of China Governor Zhou Xiaochuan said in a speech posted on the People's Bank of China's Web site.
Analysts say Zhou's recent comments are the latest sign of the country's growing assertiveness on the international stage. They also show a growing concern China has over the $1.7 trillion (1.3 trillion euros) it holds in US treasury bonds and reserve dollars.
US, Europe want dollar to stay
Obama gestures at a press conferenceBildunterschrift: Großansicht des Bildes mit der Bildunterschrift: Obama doesn't see the need for a global currency
The United States and Europe have dismissed the idea of doing away with the dollar as the international reserve currency. The European Union's top economic official said he thinks the dollar will remain the world's major reserve currency.
EU Commissioner Joaquin Almunia said he doesn't see "major structural changes in the role the dollar plays today as a major reserve currency."
Top US leaders, including President Barack Obama, said they want the dollar to keep its current status.
"I don't believe there is a need for a global currency," US President Barack Obama said at a press conference on Tuesday.
He noted that "the dollar is extraordinarily strong right now," and although the United States was "going through a rough patch" at present, the dollar enjoyed a "great deal of confidence" from investors.
Both US Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke said they would not support a plan to strip the dollar of its reserve status.
Issue likely to be debated at G20 summit
International Monetary Fund logoBildunterschrift: Großansicht des Bildes mit der Bildunterschrift: China would like to see the IMF take a more prominent role
Yet the idea is likely to be floated anyway at an upcoming Group of 20 summit planned for London in April. The meeting of industrialized countries will bring together top leaders in hopes of finding a common approach to the global financial crisis.
People's Bank of China Governor Zhou Xiaochuan said he would support moving away from the dollar to an IMF currency basket that would include a mixture of dollars, euros, sterling and yen. The IMF already created an international reserve asset in 1969, but the Special Drawing Rights, as it is called, is currently used only by governments and international institutions.
Russia has said it will bring up the proposal at the upcoming G20 meeting in London. Russia said its has broad support for its proposal among countries such as Brazil, India, China, South Korea and South Africa.
Not likely to happen anytime soon
In the near-term, such a radical departure from the way the global financial system works would be near impossible, economists say, although it could be feasible in the long term.
"The arguments for doing such a thing have economic merit, though the actual implementation of such a system would likely take a Herculean effort and a great deal of consensus building amongst economic powers," Sacha Tihanyi, currency strategist with Scotia Capital told AFP news agency.
"This is an idea, the idea of a global currency, determined by multilateral organizations, which is not new, but it's a serious proposal," John Lipsky, the IMF's first deputy managing director, said at a news conference in response to a question about China's proposal.
China growing more assertive
A man examines stock update on a display at a stock brokerage in Beijing, ChinaBildunterschrift: Großansicht des Bildes mit der Bildunterschrift: China is the biggest US creditor
The recent comments by China's top banker follows on comments made by China's Premier earlier this month. They show how concerned the country is about its US assets.
"We have lent huge amounts of money to the United States. Of course we are concerned about the safety of our assets," Chinese Premier Wen Jiabao said two weeks ago.
China holds US Treasury bonds worth $739.6 billion as of January. It is also the world's largest holder of US dollars as a reserve currency, holding more than $1 trillion, according to US government figures.
"China appears to be growing more and more assertive over its rights," currency analyst Andrew Busch of BMO Capital Markets told AFP news agency.
The dollar, which was installed as the reserve currency after World War II, has been regarded as a "safe haven" by international investors up to now.
How to Destroy the Dollar Without Really Trying
Geithner, at the Council on Foreign Relations, said the U.S. is "open" to a headline-grabbing proposal by the governor of the China's central bank, which was widely reported as being a call for a new global currency to replace the dollar, but which Geithner described as more modest and "evolutionary."
"I haven’t read the governor’s proposal. He’s a very thoughtful, very careful distinguished central banker. I generally find him sensible on every issue," Geithner said, saying that however his interpretation of the proposal was to increase the use of International Monetary Fund's special drawing rights -- shares in the body held by its members -- not creating a new currency in the literal sense.
"We’re actually quite open to that suggestion – you should see it as rather evolutionary rather building on the current architecture rather than moving us to global monetary union," he said.
At last night's presser, Obama was asked about the Chinese proposal (maybe Geithner didn't watch?) and took the rather old fashioned view that the dollar should continue to serve as the world's currency because the United States is "the strongest economy in the world, with the most stable political system in the world." Sensing a potential firestorm, Smith reports that the moderator at Geithner's event went back to the Treasury Secretary to give him a second chance at answering the question. Geithner then gave the more conventional response that the U.S. government "will do what's necessary to say we're sustaining confidence in our financial markets."
"I haven’t read the governor’s proposal. He’s a very thoughtful, very careful distinguished central banker. I generally find him sensible on every issue," Geithner said, saying that however his interpretation of the proposal was to increase the use of International Monetary Fund's special drawing rights -- shares in the body held by its members -- not creating a new currency in the literal sense.
"We’re actually quite open to that suggestion – you should see it as rather evolutionary rather building on the current architecture rather than moving us to global monetary union," he said.
At last night's presser, Obama was asked about the Chinese proposal (maybe Geithner didn't watch?) and took the rather old fashioned view that the dollar should continue to serve as the world's currency because the United States is "the strongest economy in the world, with the most stable political system in the world." Sensing a potential firestorm, Smith reports that the moderator at Geithner's event went back to the Treasury Secretary to give him a second chance at answering the question. Geithner then gave the more conventional response that the U.S. government "will do what's necessary to say we're sustaining confidence in our financial markets."
US Treasury defends dollar as world reserve currency
WASHINGTON (AFP) — US Treasury Secretary Timothy Geithner defended Wednesday the dollar as a key global reserve currency following China's call for a new global currency as an alternative to the greenback.
"I think the dollar remains the world's standard reserve currency, I think that's likely to continue for a long period of time," he said.
"As a country, we will do as necessary to make sure that we are sustaining confidence in our financial markets" and economy," he told the New York-based Council on Foreign Relations.
US President Barack Obama on Tuesday defended the dollar as "extraordinarily strong."
He said investors considered the United States "the strongest economy in the world with the most stable political system in the world" even as it was reeling from a prolonged recession stemming from financial turmoil.
People's Bank of China Governor Zhou Xiaochuan had this week called for a replacement of the dollar, installed as the reserve currency after World War II, with a different standard run by the International Monetary Fund.
Zhou suggested the IMF's Special Drawing Rights, a currency basket comprising dollars, euros, sterling and yen, could serve as a super-sovereign reserve currency, saying it would not be easily influenced by the policies of individual countries.
China is the largest creditor to the United States, being the top holder of US Treasury bonds worth 739.6 billion dollars as of January, according to US figures. It is also the world's largest holder of US dollars as a reserve currency, at more than one trillion dollars.
"I think the dollar remains the world's standard reserve currency, I think that's likely to continue for a long period of time," he said.
"As a country, we will do as necessary to make sure that we are sustaining confidence in our financial markets" and economy," he told the New York-based Council on Foreign Relations.
US President Barack Obama on Tuesday defended the dollar as "extraordinarily strong."
He said investors considered the United States "the strongest economy in the world with the most stable political system in the world" even as it was reeling from a prolonged recession stemming from financial turmoil.
People's Bank of China Governor Zhou Xiaochuan had this week called for a replacement of the dollar, installed as the reserve currency after World War II, with a different standard run by the International Monetary Fund.
Zhou suggested the IMF's Special Drawing Rights, a currency basket comprising dollars, euros, sterling and yen, could serve as a super-sovereign reserve currency, saying it would not be easily influenced by the policies of individual countries.
China is the largest creditor to the United States, being the top holder of US Treasury bonds worth 739.6 billion dollars as of January, according to US figures. It is also the world's largest holder of US dollars as a reserve currency, at more than one trillion dollars.
Will You Please, Be Quiet, Please?
Some have commented that whatever merits Treasury Secretary Tim Geithner may have, public speaking is not one of them. The dollar slumped dramatically against the euro, yen and other currencies after Mr. Geithner Wednesday said the U.S. is “quite open” to a suggestion from Chinese officials of a move to a “Special Drawing Right” linked currency system.
Geithner
Oy. “Geithner is learning the hard way about the impact that his comments can have on the currency market and despite his attempt to pacify investors, his words have left an air of uncertainty in the U.S. dollar,” writes Kathy Lien, director of currency research at Global Forex Trading.
With the Chinese of late making plenty of noise about U.S. borrowing and spending and the health of the U.S. dollar, officials in the U.S. would be expected to push back against that. President Barack Obama did as much in his press conference Tuesday, saying that the dollar was fundamentally strong, and that there was no need for another reserve currency.
With markets, it remains easy to take things out of context quickly. The Treasury secretary was responding to a proposal made by Zhou Xiaochuan, China’s central bank governor, who earlier this month said the world should consider using the IMF’s Special Drawing Rights basket as a super-sovereign reserve currency. Mr. Geithner admitted to not reading the proposal, but added that he was “open” to the suggestion to increase the use of the IMF’s drawing rights.
That’s not quite the same as saying the dollar is no longer the world’s primary reserve currency. SDRs are a basket of currencies issued by the IMF, and “given the deflation threat and the liquidity crisis a new SDR issuance may make sense, but it does not take away from the dollar’s role,” says Marc Chandler, head of forex strategy at Brown Brothers Harriman.
Mr. Geithner then tried to walk back his comments, saying, “the dollar remains the world’s dominant reserve currency. I think that’s likely to continue for a long period of time.” He added that “as a country we will do what is necessary to make sure we are sustaining confidence in our financial markets.”
To be sure, it’s not as if Mr. Geithner is the first Treasury Secretary to have trouble with communication. George W. Bush’s first Treasury head, Paul O’Neill, had a number of strange statements that markets reacted poorly to, and his second man at the helm there, John Snow, remarked early in his tenure that the dollar’s fall made economic sense, which accelerated the selloff. Even smooth operators like Robert Rubin were not immune.
Still, it’s clear Mr. Geithner, right now, is not the most artful when it comes to public speaking. It isn’t the first time, as a previous statement about China being a currency manipulator roiled bond markets. The euro rose to a high of $1.3649 after Mr. Geithner’s initial comments, and later retreated to $1.3550. The dollar fell to 96.93 yen, but recovered somewhat, and was at 97.53 yen.
Geithner
Oy. “Geithner is learning the hard way about the impact that his comments can have on the currency market and despite his attempt to pacify investors, his words have left an air of uncertainty in the U.S. dollar,” writes Kathy Lien, director of currency research at Global Forex Trading.
With the Chinese of late making plenty of noise about U.S. borrowing and spending and the health of the U.S. dollar, officials in the U.S. would be expected to push back against that. President Barack Obama did as much in his press conference Tuesday, saying that the dollar was fundamentally strong, and that there was no need for another reserve currency.
With markets, it remains easy to take things out of context quickly. The Treasury secretary was responding to a proposal made by Zhou Xiaochuan, China’s central bank governor, who earlier this month said the world should consider using the IMF’s Special Drawing Rights basket as a super-sovereign reserve currency. Mr. Geithner admitted to not reading the proposal, but added that he was “open” to the suggestion to increase the use of the IMF’s drawing rights.
That’s not quite the same as saying the dollar is no longer the world’s primary reserve currency. SDRs are a basket of currencies issued by the IMF, and “given the deflation threat and the liquidity crisis a new SDR issuance may make sense, but it does not take away from the dollar’s role,” says Marc Chandler, head of forex strategy at Brown Brothers Harriman.
Mr. Geithner then tried to walk back his comments, saying, “the dollar remains the world’s dominant reserve currency. I think that’s likely to continue for a long period of time.” He added that “as a country we will do what is necessary to make sure we are sustaining confidence in our financial markets.”
To be sure, it’s not as if Mr. Geithner is the first Treasury Secretary to have trouble with communication. George W. Bush’s first Treasury head, Paul O’Neill, had a number of strange statements that markets reacted poorly to, and his second man at the helm there, John Snow, remarked early in his tenure that the dollar’s fall made economic sense, which accelerated the selloff. Even smooth operators like Robert Rubin were not immune.
Still, it’s clear Mr. Geithner, right now, is not the most artful when it comes to public speaking. It isn’t the first time, as a previous statement about China being a currency manipulator roiled bond markets. The euro rose to a high of $1.3649 after Mr. Geithner’s initial comments, and later retreated to $1.3550. The dollar fell to 96.93 yen, but recovered somewhat, and was at 97.53 yen.
The US on Tuesday defended the use of the premier reserve status as suggested by China?”
he US on Tuesday defended the use of the premier reserve status as suggested by China?”
Geithner immediately responded: “I would.”
“And the chair?” the lawmaker asked, turning to Bernanke.
“I would also,” Bernanke said.
China is the largest creditor to the US, being the top reserve currency even as emerging economies such as China play a more critical role in the role that the dollar plays today as a reserve currency, at more than US$1 trillion.
In such a dominant position, “China appears to be growing more and more assertive over its rights,” currency analyst Andrew Busch of BMO Capital Markets said.
Meanwhile, a top economic official from the dollar and going to a global currency,” Obama said.
But People's Bank of China Governor Zhou Xiaochuan's (周小川) call to replace the dollar, installed as the top holder of US dollars as a key global currency, shrugging off China's calls to ditch it as the top holder of US dollars as a reserve currency, at more than US$1 trillion.
In such a dominant position, “China appears to be growing more and more assertive over its rights,” currency analyst Andrew Busch of BMO Capital Markets said.
Meanwhile, a top economic official from the EU, whose single currency is gaining an increasing share among central banks as a reserve currency.”
Obama stands by greenback as prime reserve currency
The US on Tuesday defended the use of the greenback as a key global currency, shrugging off China's calls to ditch it as the international reserve currency.
US President Barack Obama told a White House press conference that “the dollar is extraordinarily strong right now,” and although the US was “going through a rough patch” at present, it enjoyed a “great deal of confidence” from investors.
“I don't believe there is a need for a global currency,” Obama said.
But People's Bank of China Governor Zhou Xiaochuan's (周小川) call to replace the dollar, installed as the reserve currency after World War II, with a different standard run by the IMF was a “serious” proposal, a senior IMF official said.
US Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner said at a congressional hearing that they would not allow the dollar to be stripped of the premier reserve status as suggested by Beijing.
At the hearing, a lawmaker asked the two financial chiefs: “Would you categorically renounce the United States moving away from the dollar and going to a global currency as suggested by China?”
Geithner immediately responded: “I would.”
“And the chair?” the lawmaker asked, turning to Bernanke.
“I would also,” Bernanke said.
China is the largest creditor to the US, being the top holder of US$739.6 billion in US Treasury bonds as of January, US figures show. It is also the world's largest holder of US dollars as a reserve currency, at more than US$1 trillion.
In such a dominant position, “China appears to be growing more and more assertive over its rights,” currency analyst Andrew Busch of BMO Capital Markets said.
Meanwhile, a top economic official from the EU, whose single currency is gaining an increasing share among central banks as a reserve currency, said the dollar remained unchallenged as the dominant reserve unit.
EU Economic and Monetary Affairs Commissioner Joaquin Almunia said the dollar would remain unchallenged as the top reserve currency even as emerging economies such as China play a more critical role in the global economy.
“The relative economic powers are changing,” he told a news conference at the European Parliament in Strasbourg, France. “But I don't expect major structural changes in the role that the dollar plays today as a reserve currency.”
US President Barack Obama told a White House press conference that “the dollar is extraordinarily strong right now,” and although the US was “going through a rough patch” at present, it enjoyed a “great deal of confidence” from investors.
“I don't believe there is a need for a global currency,” Obama said.
But People's Bank of China Governor Zhou Xiaochuan's (周小川) call to replace the dollar, installed as the reserve currency after World War II, with a different standard run by the IMF was a “serious” proposal, a senior IMF official said.
US Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner said at a congressional hearing that they would not allow the dollar to be stripped of the premier reserve status as suggested by Beijing.
At the hearing, a lawmaker asked the two financial chiefs: “Would you categorically renounce the United States moving away from the dollar and going to a global currency as suggested by China?”
Geithner immediately responded: “I would.”
“And the chair?” the lawmaker asked, turning to Bernanke.
“I would also,” Bernanke said.
China is the largest creditor to the US, being the top holder of US$739.6 billion in US Treasury bonds as of January, US figures show. It is also the world's largest holder of US dollars as a reserve currency, at more than US$1 trillion.
In such a dominant position, “China appears to be growing more and more assertive over its rights,” currency analyst Andrew Busch of BMO Capital Markets said.
Meanwhile, a top economic official from the EU, whose single currency is gaining an increasing share among central banks as a reserve currency, said the dollar remained unchallenged as the dominant reserve unit.
EU Economic and Monetary Affairs Commissioner Joaquin Almunia said the dollar would remain unchallenged as the top reserve currency even as emerging economies such as China play a more critical role in the global economy.
“The relative economic powers are changing,” he told a news conference at the European Parliament in Strasbourg, France. “But I don't expect major structural changes in the role that the dollar plays today as a reserve currency.”
CANADA FX DEBT-C$ rises after Geithner comments, stocks help
* Canadian dollar up as Geithner's comments hit greenback
* Rising equity markets lend support, oil pares losses
* C$ still relatively range-bound (Updates to midday)
TORONTO, March 25 (Reuters) - The Canadian dollar reversed early weakness on Wednesday as the U.S. currency was undercut by comments from U.S. Treasury Secretary Timothy Geithner and by rising equity markets.
The flight-to-safety appeal of the U.S. currency was also hurt by better-than-expected U.S. durable goods orders for February and a jump in new home sales. [ID:nLP953349]
Geithner's comments that were the main catalyst that drew the U.S. dollar into a volatile spin as he expressed openness to expanded use of an IMF currency basket even as he said the greenback would remain the world's reserve currency for a long time. [ID:nN25418099]
Despite the weaker U.S. dollar, however, the Canadian currency stayed in the same C$1.22-C$1.24 range it has been in all week.
At noon (1600 GMT), the Canadian currency was at C$1.2254 to the U.S. dollar, or 81.61 U.S. cents, up from C$1.2318 to the U.S. dollar, or 81.18 U.S. cents, at Tuesday's close.
"Currencies were jumping around on Geithner's comments," said Shane Enright, currency strategist at CIBC World Markets.
"In general though, we haven't really deviated far from the levels we saw yesterday. We're still very much in familiar territory. The C$1.22 level seems to be key short-term (U.S. dollar) support here and today we haven't really seriously threatened that."
Stronger equity markets lent some support to the Canadian dollar, while the price of oil pared losses and neared $54 a barrel after Geithner's remarks. The currency has taken cues on direction from equity and commodity markets lately, considering them a barometer of risk sentiment.
Meanwhile, Canadian government bonds held in negative territory as stocks climbed, shrugging off a large purchase of government debt made by the U.S. Federal Reserve.
The New York Federal Reserve bought $7.5 billion in longer-dated Treasury securities whose maturities range from 2016 to 2019, part of the U.S. central bank's program to help lower long-term borrowing costs. [ID:nNYE000537]
The two-year bond fell 3 Canadian cents to C$100.12 to yield 1.193 percent. The 10-year bond slipped 42 Canadian cents to C$107.03 to yield 2.944 percent.
The 30-year bond lost 50 Canadian cents to C$122.35 to yield 3.714 percent. The U.S. 30-year bond yielded 3.691 percent. (Reporting by Ka Yan Ng; editing by Peter Galloway)
* Rising equity markets lend support, oil pares losses
* C$ still relatively range-bound (Updates to midday)
TORONTO, March 25 (Reuters) - The Canadian dollar reversed early weakness on Wednesday as the U.S. currency was undercut by comments from U.S. Treasury Secretary Timothy Geithner and by rising equity markets.
The flight-to-safety appeal of the U.S. currency was also hurt by better-than-expected U.S. durable goods orders for February and a jump in new home sales. [ID:nLP953349]
Geithner's comments that were the main catalyst that drew the U.S. dollar into a volatile spin as he expressed openness to expanded use of an IMF currency basket even as he said the greenback would remain the world's reserve currency for a long time. [ID:nN25418099]
Despite the weaker U.S. dollar, however, the Canadian currency stayed in the same C$1.22-C$1.24 range it has been in all week.
At noon (1600 GMT), the Canadian currency was at C$1.2254 to the U.S. dollar, or 81.61 U.S. cents, up from C$1.2318 to the U.S. dollar, or 81.18 U.S. cents, at Tuesday's close.
"Currencies were jumping around on Geithner's comments," said Shane Enright, currency strategist at CIBC World Markets.
"In general though, we haven't really deviated far from the levels we saw yesterday. We're still very much in familiar territory. The C$1.22 level seems to be key short-term (U.S. dollar) support here and today we haven't really seriously threatened that."
Stronger equity markets lent some support to the Canadian dollar, while the price of oil pared losses and neared $54 a barrel after Geithner's remarks. The currency has taken cues on direction from equity and commodity markets lately, considering them a barometer of risk sentiment.
Meanwhile, Canadian government bonds held in negative territory as stocks climbed, shrugging off a large purchase of government debt made by the U.S. Federal Reserve.
The New York Federal Reserve bought $7.5 billion in longer-dated Treasury securities whose maturities range from 2016 to 2019, part of the U.S. central bank's program to help lower long-term borrowing costs. [ID:nNYE000537]
The two-year bond fell 3 Canadian cents to C$100.12 to yield 1.193 percent. The 10-year bond slipped 42 Canadian cents to C$107.03 to yield 2.944 percent.
The 30-year bond lost 50 Canadian cents to C$122.35 to yield 3.714 percent. The U.S. 30-year bond yielded 3.691 percent. (Reporting by Ka Yan Ng; editing by Peter Galloway)
Geithner: Dollar Is Here To Stay
, continuing a string of comments by officials in President Obama's administration, dismissed a proposal by a Chinese official to ditch the U.S. dollar as the world's reserve currency.
Speaking at the Council on Foreign Relations Wednesday morning, Geithner said he was not familiar with People's Bank of China Gov. Zhou Xiaochuan's plan, which would see the elevation of the International Monetary Fund'sSpecial Drawing Right to become the world's de facto reserve currency, effectively replacing the dollar. (See "Beijing Shows Buyer's Remorse.")
Article Controls
"As I understand his proposal, it's a proposal designed to increase the use of the IMF's special drawing rights. And we're actually quite open to that suggestion. But you should think of it as rather evolutionary, building on the current architectures, rather than moving us to global monetary union," he said.
"It is very important just to underscore that the future evolution of the dollar's role in the system depends really primarily on how effective we are in the U.S. in getting not just recovery back on track, our financial system repaired, but we get our fiscal position back to the point where people will judge it as sustainable over time," Geithner said.
This marks the second major response from a high government official voicing his opinion of Xiaochuan's proposal. On Tuesday, former Fed chief Paul Volcker, speaking at The Wall Street Journal's Future of Finance Initiative, slammed the Chinese plan.
"I think the Chinese are a little disingenuous to say, 'Now isn't it so bad that we hold all these dollars.' They hold all these dollars because they chose to buy the dollars, and they didn't want to sell the dollars because they didn't want to depreciate their currency. It was a very simple calculation on their part, so they shouldn't come around blaming it all on us."
Speaking further about the dollar's future, Geithner said: "I think the dollar remains the world's dominant reserve currency. I think that's likely to continue for a long period of time."
Speaking at the Council on Foreign Relations Wednesday morning, Geithner said he was not familiar with People's Bank of China Gov. Zhou Xiaochuan's plan, which would see the elevation of the International Monetary Fund'sSpecial Drawing Right to become the world's de facto reserve currency, effectively replacing the dollar. (See "Beijing Shows Buyer's Remorse.")
Article Controls
"As I understand his proposal, it's a proposal designed to increase the use of the IMF's special drawing rights. And we're actually quite open to that suggestion. But you should think of it as rather evolutionary, building on the current architectures, rather than moving us to global monetary union," he said.
"It is very important just to underscore that the future evolution of the dollar's role in the system depends really primarily on how effective we are in the U.S. in getting not just recovery back on track, our financial system repaired, but we get our fiscal position back to the point where people will judge it as sustainable over time," Geithner said.
This marks the second major response from a high government official voicing his opinion of Xiaochuan's proposal. On Tuesday, former Fed chief Paul Volcker, speaking at The Wall Street Journal's Future of Finance Initiative, slammed the Chinese plan.
"I think the Chinese are a little disingenuous to say, 'Now isn't it so bad that we hold all these dollars.' They hold all these dollars because they chose to buy the dollars, and they didn't want to sell the dollars because they didn't want to depreciate their currency. It was a very simple calculation on their part, so they shouldn't come around blaming it all on us."
Speaking further about the dollar's future, Geithner said: "I think the dollar remains the world's dominant reserve currency. I think that's likely to continue for a long period of time."
Geithner: Dollar is 'dominant reserve currency'
NEW YORK
The dollar mostly recovered from its plunge early Wednesday as Treasury Secretary Timothy Geithner said in remarks before the Council on Foreign Relations the greenback will remain the world's "dominant reserve currency" for a long time.
Brian Dolan, a currency strategist at Forex.com, attributed the dollar's collapse earlier to Geithner saying the U.S. was "quite open" to an increase in the use of the IMF's "Special Drawing Rights" -- a basket of currencies made up of the euro, yen, pound and dollar that has served as a reserve asset since 1969 -- in response to a question about a recent essay by Zhou Xiaochuan, the head of China's central bank.
Zhou, in his article, recommended creating an expanded reserve currency made up of a basket of major currencies and controlled by the International Monetary Fund.
Geithner's "off-the-cuff, impromptu remark touched a nerve in the market," Dolan said. "The dollar is under suspicion due to a potential devaluation effect" from the floods of money the U.S. government is injecting into the system to help unfreeze credit markets. "Any comment of the treasury secretary distancing itself from (the dollar as) reserve status is a major blow."
Geithner later said he had interpreted Zhou's article to be a call for an expanded currency substitute used by the International Monetary Fund, according to a transcript on the Council on Foreign Relation's Web site.
Dolan said Geithner meant that world currency reserves -- which are now composed primarily of dollars, euros and some amounts of other major currencies -- should more accurately reflect the emergence of other major global players, and that countries should also one day hold stocks of Indian, Chinese and Russian currencies, for example.
The dollar mostly returned to its levels before the plunge after Geithner said "the dollar remains the dominant reserve currency and is likely to remain that for a long period of time."
President Barack Obama said Tuesday night during a press conference that China's call for a new global reserve currency was unnecessary. Earlier in the day, Geithner himself and Federal Reserve Chairman Ben Bernanke had both said they rejected the idea of a new global currency during a congressional hearing.
The 16-nation euro traded at $1.3548 in New York midday trading from $1.3518 late Tuesday, after previously bouncing as high as $1.3651 on Geithner's statements.
The dollar also sank to 96.89 Japanese yen before recovering to 97.72 yen. Late Tuesday, the dollar bought 97.89 yen.
The dollar mostly recovered from its plunge early Wednesday as Treasury Secretary Timothy Geithner said in remarks before the Council on Foreign Relations the greenback will remain the world's "dominant reserve currency" for a long time.
Brian Dolan, a currency strategist at Forex.com, attributed the dollar's collapse earlier to Geithner saying the U.S. was "quite open" to an increase in the use of the IMF's "Special Drawing Rights" -- a basket of currencies made up of the euro, yen, pound and dollar that has served as a reserve asset since 1969 -- in response to a question about a recent essay by Zhou Xiaochuan, the head of China's central bank.
Zhou, in his article, recommended creating an expanded reserve currency made up of a basket of major currencies and controlled by the International Monetary Fund.
Geithner's "off-the-cuff, impromptu remark touched a nerve in the market," Dolan said. "The dollar is under suspicion due to a potential devaluation effect" from the floods of money the U.S. government is injecting into the system to help unfreeze credit markets. "Any comment of the treasury secretary distancing itself from (the dollar as) reserve status is a major blow."
Geithner later said he had interpreted Zhou's article to be a call for an expanded currency substitute used by the International Monetary Fund, according to a transcript on the Council on Foreign Relation's Web site.
Dolan said Geithner meant that world currency reserves -- which are now composed primarily of dollars, euros and some amounts of other major currencies -- should more accurately reflect the emergence of other major global players, and that countries should also one day hold stocks of Indian, Chinese and Russian currencies, for example.
The dollar mostly returned to its levels before the plunge after Geithner said "the dollar remains the dominant reserve currency and is likely to remain that for a long period of time."
President Barack Obama said Tuesday night during a press conference that China's call for a new global reserve currency was unnecessary. Earlier in the day, Geithner himself and Federal Reserve Chairman Ben Bernanke had both said they rejected the idea of a new global currency during a congressional hearing.
The 16-nation euro traded at $1.3548 in New York midday trading from $1.3518 late Tuesday, after previously bouncing as high as $1.3651 on Geithner's statements.
The dollar also sank to 96.89 Japanese yen before recovering to 97.72 yen. Late Tuesday, the dollar bought 97.89 yen.
Geithner Remarks on IMF Roil Foreign-Exchange Market
Treasury Secretary Timothy Geithner sent the dollar tumbling with comments about China’s ideas for overhauling the global monetary system, only to drive it back up by affirming that it should remain the world’s reserve currency.
Geithner was initially asked at a Council on Foreign Relations event in New York about proposals from People’s Bank of China Governor Zhou Xiaochuan for a new international reserve currency. He said “as I understand his proposal, it’s a proposal designed to increase the use of the IMF’s special drawing rights. And we’re actually quite open to that.”
The dollar slid as much as 1.3 percent against the euro within 10 minutes of news accounts of Geithner’s remarks. The U.S. currency was down 0.6 percent at $1.3553 as of 12:31 p.m. in New York.
Roger Altman, who worked with Geithner as deputy Treasury secretary in the Clinton administration, later asked Geithner whether he wanted to “clarify” his remarks.
“I’d like to ask one final question, in effect on behalf of the market,” said Altman, founder of Evercore Partners Inc. “Let me ask the question this way. Do you see any change over the foreseeable future in the basic role of the dollar as the world’s key reserve currency?”
‘Strong’ Dollar
Geithner responded by saying that “I think the dollar remains the world’s dominant reserve currency.” In an interview with CNBC broadcast after the event, the Treasury chief said that a “strong dollar” is in “America’s interest.”
In his earlier response, Geithner said an increased use of SDRs should be “rather evolutionary, building on the current architecture, rather than moving us to global monetary union.”
Those remarks don’t indicate Geithner favors moving to a system with the SDR as a reserve currency, strategist Lee Hardman at Bank of Tokyo-Mitsubishi Ltd. wrote in a note.
“That was the big concern amongst the confusion,” London- based Hardman said. “A move to an SDR-linked system away from the dollar would naturally lead to a reduction in the dollar’s share of global reserves.”
Geithner, a former Treasury undersecretary for international affairs and president of the Federal Reserve Bank of New York, which carries out U.S. interventions in currency markets, also said that “we will do what’s necessary to make sure we’re sustaining confidence in our financial markets.”
Geithner misses lifeline, sinks dollar
Treasury Secretary Tim Geithner had been having a relatively good week until today.
On Monday, he introduced his detailed bank-rescue plan which financial markets greeted with a huge rally.
Yesterday, he did fairly well weathering congressional questioning of his role in the AIG bonuses affair.
But today he sent signals, apparently unwittingly, that the Obama Administration might not be all that into having the dollar as the world's reserve currency, a position that would have placed the administration at odds with its predecessors and remade the world of global currencies.
Geithner was asked about an article by the Chinese finance minister in which the Chinese official suggested the need for a new global currency. Geithner's response seemed to indicate he could live with that.
Here's an excerpt of the exchange:
Q Well, thank you. Wonder if you could comment on two related things.
One, the Chinese government proposal about a global currency; and about the IMF regulations that were -- the new IMF idea about, you know, very general agreements to borrow and having a faster ability to disburse to the (margin ?) markets.
SEC. GEITHNER: On the first question, I haven't read the governor's proposal. He's a remarkably -- a very thoughtful, very careful, distinguished central banker. Generally find him sensible on every issue. But as I understand his proposal, it's a proposal designed to increase the use of the IMF's special drawing rights. And we're actually quite open to that suggestion. But you should think of it as rather evolutionary, building on the current architectures, than -- rather than -- rather than moving us to global monetary union.
Fortunately for Geithner, the question and answer session was moderated by Roger Altman who was a senior Treasury official in the Clinton Administration. Altman immediately recognized that Geithner had slipped off the deck and was a man overboard, at least when it came to U.S. dollar policy. Altman tried to throw Geithner a lifeline.
MR. ALTMAN: Let me just follow that up for one second. A number -- I haven't read the governor's essay, either, but a slew of news reports interpreted his comments to suggest that the world needs a super reserve currency, and that the dollar, on some gradual basis, ought to be replaced in favor of that. And I wasn't entirely clear what your response was.
SEC. GEITHNER: Well, as I said, I haven't read his proposal, but I thought the initial reaction was sort of ahead of the details of the proposal I saw. The only thing concrete I saw was a reference to expanding the use of the SDR, but I look forward to reading his figures. As I said, I have tremendous respect for him. He's a really thoughtful, pragmatic guy, and he has a great record of credibility in China as a whole, so anything he's -- he's thinking about deserves some consideration.
It is very important just to underscore that the future evolution of the dollar's role in the system depends really primarily on how effective we are in the United States in getting not just recovery back on track, our financial system repaired, but we get our fiscal position back to the point where people will judge it as sustainable over time.
Geithner said a whole lot more blah, blah, blah. But he never said the magic words which Altman, to his credit, recognized.
So the question and answer session continued. Then, just before it ended, Altman returned to the dollar question. This time he did everything but answer the question himself for Geithner.
MR. ALTMAN: I'd like to ask one final question, in effect, on behalf of the market. It might be useful if you tried to clarify your earlier comment on the reaction to the central bank governor of China's idea, and so let me ask the question this way. Do you see any change over the foreseeable future in the basic role of the dollar as the world's key reserve currency, or the reserve currency?
SEC. GEITHNER: I do not. I think the dollar remains the world's dominant reserve currency. I think that's likely to continue for a long period of time. And as a country, we will do what's necessary to make sure we're sustaining confidence in our financial markets, and in the productive capacity of this economy and in our long-term fundamentals.
On Monday, he introduced his detailed bank-rescue plan which financial markets greeted with a huge rally.
Yesterday, he did fairly well weathering congressional questioning of his role in the AIG bonuses affair.
But today he sent signals, apparently unwittingly, that the Obama Administration might not be all that into having the dollar as the world's reserve currency, a position that would have placed the administration at odds with its predecessors and remade the world of global currencies.
Geithner was asked about an article by the Chinese finance minister in which the Chinese official suggested the need for a new global currency. Geithner's response seemed to indicate he could live with that.
Here's an excerpt of the exchange:
Q Well, thank you. Wonder if you could comment on two related things.
One, the Chinese government proposal about a global currency; and about the IMF regulations that were -- the new IMF idea about, you know, very general agreements to borrow and having a faster ability to disburse to the (margin ?) markets.
SEC. GEITHNER: On the first question, I haven't read the governor's proposal. He's a remarkably -- a very thoughtful, very careful, distinguished central banker. Generally find him sensible on every issue. But as I understand his proposal, it's a proposal designed to increase the use of the IMF's special drawing rights. And we're actually quite open to that suggestion. But you should think of it as rather evolutionary, building on the current architectures, than -- rather than -- rather than moving us to global monetary union.
Fortunately for Geithner, the question and answer session was moderated by Roger Altman who was a senior Treasury official in the Clinton Administration. Altman immediately recognized that Geithner had slipped off the deck and was a man overboard, at least when it came to U.S. dollar policy. Altman tried to throw Geithner a lifeline.
MR. ALTMAN: Let me just follow that up for one second. A number -- I haven't read the governor's essay, either, but a slew of news reports interpreted his comments to suggest that the world needs a super reserve currency, and that the dollar, on some gradual basis, ought to be replaced in favor of that. And I wasn't entirely clear what your response was.
SEC. GEITHNER: Well, as I said, I haven't read his proposal, but I thought the initial reaction was sort of ahead of the details of the proposal I saw. The only thing concrete I saw was a reference to expanding the use of the SDR, but I look forward to reading his figures. As I said, I have tremendous respect for him. He's a really thoughtful, pragmatic guy, and he has a great record of credibility in China as a whole, so anything he's -- he's thinking about deserves some consideration.
It is very important just to underscore that the future evolution of the dollar's role in the system depends really primarily on how effective we are in the United States in getting not just recovery back on track, our financial system repaired, but we get our fiscal position back to the point where people will judge it as sustainable over time.
Geithner said a whole lot more blah, blah, blah. But he never said the magic words which Altman, to his credit, recognized.
So the question and answer session continued. Then, just before it ended, Altman returned to the dollar question. This time he did everything but answer the question himself for Geithner.
MR. ALTMAN: I'd like to ask one final question, in effect, on behalf of the market. It might be useful if you tried to clarify your earlier comment on the reaction to the central bank governor of China's idea, and so let me ask the question this way. Do you see any change over the foreseeable future in the basic role of the dollar as the world's key reserve currency, or the reserve currency?
SEC. GEITHNER: I do not. I think the dollar remains the world's dominant reserve currency. I think that's likely to continue for a long period of time. And as a country, we will do what's necessary to make sure we're sustaining confidence in our financial markets, and in the productive capacity of this economy and in our long-term fundamentals.
FOREX-Dollar slides vs euro as Geithner comment weighs
* Geithner causes euro/dollar volatility
* Investors move quickly on SDR comment
* Geithner clarifies dollar to remain top reserve currency (Adds comment, updates prices, changes byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, March 25 (Reuters) - The dollar fell against the euro in choppy trading on Wednesday after U.S. Treasury Secretary Timothy Geithner said he was open to expanding the use of the International Monetary Fund's special drawing rights.
Investors initially interpreted his remarks as an endorsement of China's proposal on Monday to eventually replace the dollar as the world's reserve currency by the IMF's SDR.
Geithner's comments sent the dollar to session lows against the euro, although it did recoup some of its losses after the Treasury's top official said the greenback would keep its status as the top reserve currency for a long time. For details, see [ID:nN25385009]
"Geithner's comments this morning regarding ... SDRs and the dollar came a bit out of left field," said Dustin Reid, a currency strategist, at RBS Global Banking and Markets in Chicago.
He "suggested he is 'open to changing the weightings and currencies included for the IMF's SDR. Geithner did not say that the world monetary system should move away from using the dollar as the preferred global reserve currency in favor of using SDRs as some initial headlines were suggesting."
In early afternoon trading, the euro was up 0.6 percent against the dollar at $1.3550 after going as high as $1.3649 in the wake of Geithner's remarks, according to Reuters data.
China's central bank governor said earlier this week that the world should consider the SDR, a basket of dollars, euros, sterling and yen, as a super-sovereign reserve currency. [ID:nPEK184558]
Geithner, responding to a question at a Council of Foreign Relations event in New York, said he had not read the Chinese proposal but added, "as I understand it, it's a proposal designed to increase the use of the IMF's Special Drawing Rights. I am actually quite open to that suggestion."
Analysts said the initial gyrations in the dollar were a mistake.
Marc Chandler, global head of currency strategy at Brown Brothers Harriman in a note to clients said President Barack Obama's recent comments about the dollar being fundamentally strong and there being no need of another reserve currency, is more of the underlying signal.
Obama said in a prime-time televised news conference on Tuesday: "I don't believe that there's a need for a global currency", and noted that the dollar was "extraordinarily strong right now".
* Investors move quickly on SDR comment
* Geithner clarifies dollar to remain top reserve currency (Adds comment, updates prices, changes byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, March 25 (Reuters) - The dollar fell against the euro in choppy trading on Wednesday after U.S. Treasury Secretary Timothy Geithner said he was open to expanding the use of the International Monetary Fund's special drawing rights.
Investors initially interpreted his remarks as an endorsement of China's proposal on Monday to eventually replace the dollar as the world's reserve currency by the IMF's SDR.
Geithner's comments sent the dollar to session lows against the euro, although it did recoup some of its losses after the Treasury's top official said the greenback would keep its status as the top reserve currency for a long time. For details, see [ID:nN25385009]
"Geithner's comments this morning regarding ... SDRs and the dollar came a bit out of left field," said Dustin Reid, a currency strategist, at RBS Global Banking and Markets in Chicago.
He "suggested he is 'open to changing the weightings and currencies included for the IMF's SDR. Geithner did not say that the world monetary system should move away from using the dollar as the preferred global reserve currency in favor of using SDRs as some initial headlines were suggesting."
In early afternoon trading, the euro was up 0.6 percent against the dollar at $1.3550
China's central bank governor said earlier this week that the world should consider the SDR, a basket of dollars, euros, sterling and yen, as a super-sovereign reserve currency. [ID:nPEK184558]
Geithner, responding to a question at a Council of Foreign Relations event in New York, said he had not read the Chinese proposal but added, "as I understand it, it's a proposal designed to increase the use of the IMF's Special Drawing Rights. I am actually quite open to that suggestion."
Analysts said the initial gyrations in the dollar were a mistake.
Marc Chandler, global head of currency strategy at Brown Brothers Harriman in a note to clients said President Barack Obama's recent comments about the dollar being fundamentally strong and there being no need of another reserve currency, is more of the underlying signal.
Obama said in a prime-time televised news conference on Tuesday: "I don't believe that there's a need for a global currency", and noted that the dollar was "extraordinarily strong right now".
Geithner says strong dollar in U.S. interest
WASHINGTON (Reuters) - Treasury Secretary Timothy Geithner said on Wednesday that a strong dollar is in the United States' interest and that there were no signs foreign investors were tiring of buying U.S. government debt.
"I want to say this very clearly, a strong dollar is in America's interest. We are going to make sure to pursue policies that improve the long-term fundamentals of the U.S. economy," he told CNBC.
Geithner said there was "no evidence" foreign investors were losing interest in purchasing U.S. debt securities.
Earlier on Wednesday, the dollar slipped after Geithner said he was open to a proposal by China to increase the use of IMF Special Drawing Rights that some have seen as a suggestion they become the world's dominant reserve currency.
Geithner said there were some signs that sustained government efforts to stabilize the financial system were beginning to pay off.
"We've seen a lot of adjustment across the U.S. economy, across the global economy, and you're seeing the pace of deterioration start to slow in some areas," he said, but added it will take time to get over the current downturn.
In the meantime, Geithner acknowledged, more money may be needed for a U.S. bank bailout. He said there still is money in the $700-billion Troubled Asset Relief Program and that will be used quickly.
"But we always said this crisis may require more resources to deal with effectively, and we're going to make sure we work with the Congress over time so that we can do this on a scale that is going to bring recovery back as soon as possible," he added.
Geithner said China, which is now the single largest buyer of U.S. debt, was playing a "constructive" role in helping the global economy get through the current crisis by trying to keep its own economy performing well.
"The things they are doing to get their economy stronger, to encourage domestic demand growth, to allow further evolution in their basic financial framework, those things are very important, consequential policies and we're working very closely with them," he said.
(Additional reporting by Tim Ahmann and David Lawder; Editing by Andrea Ricci)
"I want to say this very clearly, a strong dollar is in America's interest. We are going to make sure to pursue policies that improve the long-term fundamentals of the U.S. economy," he told CNBC.
Geithner said there was "no evidence" foreign investors were losing interest in purchasing U.S. debt securities.
Earlier on Wednesday, the dollar slipped after Geithner said he was open to a proposal by China to increase the use of IMF Special Drawing Rights that some have seen as a suggestion they become the world's dominant reserve currency.
Geithner said there were some signs that sustained government efforts to stabilize the financial system were beginning to pay off.
"We've seen a lot of adjustment across the U.S. economy, across the global economy, and you're seeing the pace of deterioration start to slow in some areas," he said, but added it will take time to get over the current downturn.
In the meantime, Geithner acknowledged, more money may be needed for a U.S. bank bailout. He said there still is money in the $700-billion Troubled Asset Relief Program and that will be used quickly.
"But we always said this crisis may require more resources to deal with effectively, and we're going to make sure we work with the Congress over time so that we can do this on a scale that is going to bring recovery back as soon as possible," he added.
Geithner said China, which is now the single largest buyer of U.S. debt, was playing a "constructive" role in helping the global economy get through the current crisis by trying to keep its own economy performing well.
"The things they are doing to get their economy stronger, to encourage domestic demand growth, to allow further evolution in their basic financial framework, those things are very important, consequential policies and we're working very closely with them," he said.
(Additional reporting by Tim Ahmann and David Lawder; Editing by Andrea Ricci)
China Talks Tough with Call to Dump Dollar
Just over one week before President Barack Obama and other world leaders meet in London for a summit focusing on the , China is making clear it wants a greater say in managing economic policies worldwide. The latest blast from Beijing: a call by China's top central banker to dump the U.S. dollar as the world's most important currency. People's Bank of China Governor Zhou Xiaochuan, in a paper released on the bank's Web site on Mar. 23, called for a new "super-sovereign reserve currency" to replace the current reliance on the dollar. The goal, Zhou writes, is to "create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run."
Not surprisingly, U.S. officials aren't welcoming the idea. Speaking on Mar. 24 at a congressional hearing in Washington, Treasury Secretary and Federal Reserve Chairman both said they categorically oppose the change.
And pretty much everyone agrees it's not going to happen. In his paper, Zhou called for using the International Monetary Fund's "special drawing right" (SDR) currency, now used mainly for accounting purposes by the Washington-based organization, and pegged to the euro, pound, yen, and dollar. To succeed, the new currency would also have to be adopted worldwide by private companies for international trade transactions, a tremendous challenge. "Denominating trade and investment is almost always done in terms of one currency—and making the SDR work like that is almost impossible to imagine," Stephen Green, research chief of Shanghai-based Standard Chartered China wrote in an e-mail to BusinessWeek.
Seeking More Say
How then to read Zhou's roiling of the financial waters? It's most likely a shot across the bow signaling China's intention to have a greater voice in world financial affairs. When he attends the G-20 opening on Apr. 2, Chinese President Hu Jintao is almost certain to call for expanding China's voting rights at the IMF. Presently the members of the European Union have a combined 32% of voting rights and the U.S. has 17%, compared with only 3.7% for China and 1.9% for India. Beijing, too, may offer to purchase up to $100 billion of any IMF-issued new bonds, a People's Bank of China vice-governor suggested in a press conference in Beijing on Mar. 23.
By calling for a super-sovereign reserve currency, Zhou signals China's dissatisfaction with the global economic pecking order. As well as demonstrating Beijing's new more assertive role in the world economy, Zhou's proposal to replace the dollar may also signal China's intention to move more aggressively to diversify its foreign exchange holdings. Zhou's paper contains a "hint of a threat that the U.S. should not take the dollar's privileged status for granted," Mark Williams, international economist at Capital Economics in London, wrote in a Mar. 24 report.
The central banker's controversial proposal is the latest in a series of moves signaling Chinese irritation with the U.S. For instance, Premier Wen Jiabao on Mar. 13 told reporters he was "worried" about the value of China's massive dollar holdings. Standard Chartered Bank (STAN.L) estimates that China, the world's largest holder of U.S. debt, held $1.45 trillion in U.S. securities at the end of 2008, out of a total $1.9 trillion in foreign reserves. As the starts spending $787 billion to boost the U.S. economy and another $1 trillion on its cash-strapped banks, Beijing is worried inflation in the U.S. could erode the value of its dollar holdings. During the Mar. 13 press conference broadcast live across China, Wen called on the U.S. to take efforts to "maintain its good credit, to honor its promises, and to guarantee the safety of China's assets."
Despite Zhou's bold proposal, Beijing also knows that any rapid move toward a new reserve tender could backfire for China. That would erode the value of China's dollar holdings and likely would lift the value of the yuan, China's currency, making the country's already beleaguered export sector even less competitive. "To the extent that its concern is that dollar weakness will undermine the value of its existing reserves, it clearly has no desire to precipitate such a shift by moving out of dollar assets," wrote Williams of Capital Economics. "Zhou is well aware that the dollar's position is secure for now." Indeed, the same day Zhou called for the new reserve currency, China's State Administration of Foreign Exchange issued a statement that it supported the dollar and would continue buying U.S. Treasuries.
Dollar Declines on Geithner’s Comment on Special Drawing Rights
The dollar fell the most in almost a week against the euro on concern Treasury Secretary Timothy Geithner supported a Chinese plan to blunt demand among global central banks for the greenback.
The U.S. currency pared losses after Geithner clarified his comments on the International Monetary Fund’s special drawing rights and said the dollar will remain the world’s primary reserve currency “for a long period of time.” The yen declined against most major currencies as stocks rallied on U.S. durable- goods and housing reports, reducing demand for safety.
“The dollar’s having a bad week,” said Jessica Hoversen, a foreign-exchange analyst in Chicago at MF Global Ltd., the world’s largest broker of exchange-traded futures and options contracts. “Government policy is only as effective as the government is credible. Having a government official speak out of both sides of his mouth in five minutes erodes credibility.”
The U.S. currency weakened as much as 1.2 percent to $1.3651 per euro, the biggest intraday decline since March 19, before trading at $1.3573 at 1:57 p.m. in New York. The dollar dropped 0.3 percent to 97.57 yen from 97.86. The euro increased 0.5 percent to 132.45 yen from 131.81.
The dollar dropped on Geithner’s comment in response to a question at a Council on Foreign Relations event in New York on People’s Bank of China Governor Zhou Xiaochuan’s proposal regarding the use of special drawing rights, a unit of account at the fund used for member countries’ reserves with the IMF.
The Treasury secretary said that “as I understand his proposal, it’s a proposal designed to increase the use of the IMF’s special drawing rights. And we’re actually quite open to that suggestion.”
Clarifying Remarks
When Geithner was later asked whether he wanted to clarify his remarks, he affirmed the dollar’s role as the world’s reserve currency.
“That was the big concern amongst the confusion,” London- based Lee Hardman at Bank of Tokyo-Mitsubishi Ltd. wrote in a research note today. “A move to an SDR-linked system away from the dollar would naturally lead to a reduction in the dollar’s share of global reserves.”
Zhou said on March 23 in a report posted on the bank’s Web site that special drawing rights, monetary units valued against a composite of currencies, should also be used for international trade, financial transactions and commodity pricing. The IMF should aim in the longer term to create a “super-sovereign reserve currency,” Zhou said.
Weaker Yen
The yen dropped 1.1 percent to 55.72 against the New Zealand dollar and 0.9 percent to 6.88 versus Mexico’s peso as the Standard & Poor’s 500 Index increased 1.2 percent on U.S. economic reports, encouraging speculation that Japanese investors will buy higher-yielding assets overseas.
Orders for U.S. durable goods increased 3.4 percent in February, the biggest gain in more than a year, the Commerce Department reported today. The median forecast of 69 economists surveyed by Bloomberg was for a decrease of 2.5 percent.
Another report from the department indicated new-home sales increased 4.7 percent from a record low pace in January, compared with a 2.9 decrease forecast by economists.
The collapse in demand for Japan’s exports may push manufacturing sentiment to the lowest in 30 years, economists said before the central bank’s Tankan survey due on April 1.
South Korea’s won was the biggest gainer versus the dollar after a finance ministry official said yesterday the government aims to spend 17.7 trillion won ($13.3 billion) by May or June to help the economy recover.
‘Positive Sentiment’
“There’s some positive sentiment that has led to a softening of the U.S. dollar” against the won, said Thio Chin Loo, a senior currency analyst at BNP Paribas SA in Singapore.
The won climbed as much as 2.1 percent to 1,362 per dollar, the strongest level since Jan. 29. South Korea’s economic stimulus plan includes funds for cash handouts, cheap loans, infrastructure and job training, the government said yesterday.
South Korea’s currency is the biggest loser against the dollar this quarter, dropping 7.6 percent on speculation the nation’s economic slump will deepen.
The 16-nation euro gained earlier versus the dollar as a report showed German business confidence this month was in line with the expectations of economists.
The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, was 82.1 in March, compared with 82.6 in the previous month. The median forecast of 37 economists surveyed by Bloomberg was for a drop to 82.2. The reading was the worst since November 1982.
“Sentiment data is pretty dire around the world at the moment, and the German Ifo is a prime example of that,” said Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank Ltd. in London. “However, it more or less matched expectations, and as long as things don’t get worse the euro will benefit.”
US backing for world currency stuns markets
The dollar plunged instantly against the euro, yen, and sterling as the comments flashed across trading screens. David Bloom, currency chief at HSBC, said the apparent policy shift amounts to an earthquake in geo-finance.
"The mere fact that the US Treasury Secretary is even entertaining thoughts that the dollar may cease being the anchor of the global monetary system has caused consternation," he said.
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Mr Geithner later qualified his remarks, insisting that the dollar would remain the "world's dominant reserve currency ... for a long period of time" but the seeds of doubt have been sown.
The markets appear baffled by the confused statements emanating from Washington. President Barack Obama told a new conference hours earlier that there was no threat to the reserve status of the dollar.
"I don't believe that there is a need for a global currency. The reason the dollar is strong right now is because investors consider the United States the strongest economy in the world with the most stable political system in the world," he said.
The Chinese proposal, outlined this week by central bank governor Zhou Xiaochuan, calls for a "super-sovereign reserve currency" under IMF management, turning the Fund into a sort of world central bank.
The idea is that the IMF should activate its dormant powers to issue Special Drawing Rights. These SDRs would expand their role over time, becoming a "widely-accepted means of payments".
Mr Bloom said that any switch towards use of SDRs has direct implications for the currency markets. At the moment, 65pc of the world's $6.8 trillion stash of foreign reserves is held in dollars. But the dollar makes up just 42pc of the basket weighting of SDRs. So any SDR purchase under current rules must favour the euro, yen and sterling.
Beijing has the backing of Russia and a clutch of emerging powers in Asia and Latin America. Economists have toyed with such schemes before but the issue has vaulted to the top of the political agenda as creditor states around the world takes fright at the extreme measures now being adopted by the Federal Reserve, especially the decision to buy US government debt directly with printed money.
Mr Bloom said the US is discovering that the sensitivities of creditors cannot be ignored. "China holds almost 30pc of the world's entire reserves. What they say matters," he said.
Mr Geithner's friendly comments about the SDR plan seem intended to soothe Chinese feelings after a spat in January over alleged currency manipulation by Beijing, but he will now have to explain his own categorical assurance to Congress on Tuesday that he would not countenance any moves towards a world currency.
FOREX-Dollar lower vs euro in volatile trade on Geithner
* Geithner causes euro/dollar volatility
* Investors move quickly on SDR comment
(Recasts, adds details, adds comment, updates prices)
By Nick Olivari
NEW YORK, March 25 (Reuters) - The U.S. dollar slid against the euro on Wednesday after U.S. Treasury Secretary Timothy Geithner expressed openness to expanded use of an IMF currency basket even as he said the greenback would remain the world's reserve currency for a long time. [ID:nN25385009].
Investors initially interpreted his remarks as negative for the dollar, sending it to a session low against the euro.
China's central bank governor said earlier this month said the world should consider the special drawing right (SDR), a basket of dollars, euros, sterling and yen, as a super-sovereign reserve currency.
Geithner, responding to a question at a Council of Foreign Relations event in New York, said he had not read the Chinese proposal but added, "as I understand it, it's a proposal designed to increase the use of the IMF's Special Drawing Rights. I am actually quite open to that suggestion."
Analysts said the initial gyrations in the dollar were a mistake.
The market took Geithner's willingness to consider the SDR currency issue as a negative sign for the dollar, said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in a note to clients. "This is most likely mistaken. Geithner admits to not having read China's proposal."
Chandler said President Barack Obama's recent comments about the dollar being fundamentally strong and there being no need of another reserve currency, is more of the underlying signal.
Obama said in a prime-time televised news conference on Tuesday: "I don't believe that there's a need for a global currency", and noted that the dollar was "extraordinarily strong right now". [ID:nN24347329]
The euro was last up 0.6 percent against the dollar at $1.3543 after going as high as $1.3649. It was trading at around $1.3495 when Geithner began speaking.
Geithner's comments completely overshadowed market influences earlier in the global session and other analysts were less kind to the Treasury Secretary.
"These contradictory statements are clearly the act of an amateur Treasury Secretary that has been thrust onto the public forum and is struggling with the need to be very particular in his choice of words," said Kathy Lien, director of currency research at GFT Forex in New York in a note.
"Geithner is learning the hard way about the impact that his comments can have on the currency market and despite his attempt to pacify investors, his words have left air of uncertainty in the U.S. dollar."
* Investors move quickly on SDR comment
(Recasts, adds details, adds comment, updates prices)
By Nick Olivari
NEW YORK, March 25 (Reuters) - The U.S. dollar slid against the euro on Wednesday after U.S. Treasury Secretary Timothy Geithner expressed openness to expanded use of an IMF currency basket even as he said the greenback would remain the world's reserve currency for a long time. [ID:nN25385009].
Investors initially interpreted his remarks as negative for the dollar, sending it to a session low against the euro.
China's central bank governor said earlier this month said the world should consider the special drawing right (SDR), a basket of dollars, euros, sterling and yen, as a super-sovereign reserve currency.
Geithner, responding to a question at a Council of Foreign Relations event in New York, said he had not read the Chinese proposal but added, "as I understand it, it's a proposal designed to increase the use of the IMF's Special Drawing Rights. I am actually quite open to that suggestion."
Analysts said the initial gyrations in the dollar were a mistake.
The market took Geithner's willingness to consider the SDR currency issue as a negative sign for the dollar, said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in a note to clients. "This is most likely mistaken. Geithner admits to not having read China's proposal."
Chandler said President Barack Obama's recent comments about the dollar being fundamentally strong and there being no need of another reserve currency, is more of the underlying signal.
Obama said in a prime-time televised news conference on Tuesday: "I don't believe that there's a need for a global currency", and noted that the dollar was "extraordinarily strong right now". [ID:nN24347329]
The euro was last up 0.6 percent against the dollar at $1.3543
Geithner's comments completely overshadowed market influences earlier in the global session and other analysts were less kind to the Treasury Secretary.
"These contradictory statements are clearly the act of an amateur Treasury Secretary that has been thrust onto the public forum and is struggling with the need to be very particular in his choice of words," said Kathy Lien, director of currency research at GFT Forex in New York in a note.
"Geithner is learning the hard way about the impact that his comments can have on the currency market and despite his attempt to pacify investors, his words have left air of uncertainty in the U.S. dollar."
US dollar slips as optimism fades on bank asset plan
* Business
* US dollar slips as optimism fades on bank asset plan
* Sterling slides on failed gilt auction, retails sales
* U.S. durable goods better than expected
(Recasts, adds comment, updates prices, changes byline, changes dateline, previous LONDON)
By Nick Olivari
NEW YORK, March 24 (Reuters) - The U.S. dollar slipped against major currencies on Wednesday, despite a jump in U.S. durable goods orders, as investors continued to assess whether the U.S. plan to remove non-performing assets from banks was enough to revive the financial system.
Investors were at first euphoric when more details of the bank plan were released on Monday by the U.S. Treasury Department in the wake of news last week that the Federal Reserve would to buy U.S. Treasury debt.
But investors can also see a downside to a Federal authority buying government debt and are uncertain the Treasury's plans will work.
Better than expected U.S. durable goods orders for February were also limited the need for the U.S. dollar as a safe haven. [ID:nN24363179].
Sterling extended early broad losses to hit a session low versus the dollar after data showing that retail sales fell more sharply than expected in March and after a UK gilt auction failed for the first time since 2002.
"The market still wants to build short dollar positions right now and I think any better than expected news is likely to play into that theme," said Michael Woolfolk, senior currency strategist, Bank of New York Mellon in New York said of durable goods.
The euro rose 0.3 percent against the dollar to $1.3502 .
Investors will now be looking for more more details of the U.S. government plan to revive the economy when Treasury Secretary Timothy Geithner speaks before the Council on Foreign Relations in New York during the New York morning.
"Markets took a step back overnight from the euphoria that was generated after U.S. Treasury Secretary Geithner presented the latest US plans to purge banks' balance sheets of toxic assets on Monday," said the Saxo Bank strategy team in a note to clients.
POUND PUMMELLED
The pound fell after the Confederation of British Industries distributive trades survey balance fell to -44 in March from -25 in February. Analysts had expected a smaller deterioration to -35.
The failure to achieve a fully covered gilt auction, suggesting reduced demand for sterling assets, also weighed on the currency [ID:nLP456926].
Gilt strategists blamed the auction's failure on market uncertainty created by Bank of England Governor Mervyn King when he said on Tuesday that the BoE could scale back its programme of gilt purchases if they were especially successful in boosting the economy.
"The gilt auction was appalling and at the next BoE meeting they may have to extend the range of eligible maturities (for quantitative easing)," said Christian Lawrence, FX strategist at RBC Capital Markets in London.
The pound fell 0.7 percent to $1.4574, while the euro rose 1.1 percent to 92.66 pence.
The yen was supported by Japanese investors repatriating funds from overseas before the end of the financial year on March 31, traders said.
The dollar was last little changed against the yen at 97.78 yen , although the euro was 0.4 percent higher at 132.14 yen on electronic trading platform EBS .
Frankfurt-based Commerzbank currency strategist Ulrich Leuchtmann said although there were no fundamental reasons to buy the Japanese currency, there were concerns that its sharp falls seen in February had been overdone, he added.
In other news on Wednesday, Eurogroup head Jean-Claude Juncker said Europe is not prepared to boost spending beyond those stimulus measures it has already announced, even if pressured to do so by the U.S. [ID:nLP219078]. (Additional reporting by Kirsten Donovan in London and Wanfeng Zhou in New York) (Reporting by Nick Olivari; Editing by Theodore d'Afflisio) )
* US dollar slips as optimism fades on bank asset plan
* Sterling slides on failed gilt auction, retails sales
* U.S. durable goods better than expected
(Recasts, adds comment, updates prices, changes byline, changes dateline, previous LONDON)
By Nick Olivari
NEW YORK, March 24 (Reuters) - The U.S. dollar slipped against major currencies on Wednesday, despite a jump in U.S. durable goods orders, as investors continued to assess whether the U.S. plan to remove non-performing assets from banks was enough to revive the financial system.
Investors were at first euphoric when more details of the bank plan were released on Monday by the U.S. Treasury Department in the wake of news last week that the Federal Reserve would to buy U.S. Treasury debt.
But investors can also see a downside to a Federal authority buying government debt and are uncertain the Treasury's plans will work.
Better than expected U.S. durable goods orders for February were also limited the need for the U.S. dollar as a safe haven. [ID:nN24363179].
Sterling extended early broad losses to hit a session low versus the dollar after data showing that retail sales fell more sharply than expected in March and after a UK gilt auction failed for the first time since 2002.
"The market still wants to build short dollar positions right now and I think any better than expected news is likely to play into that theme," said Michael Woolfolk, senior currency strategist, Bank of New York Mellon in New York said of durable goods.
The euro rose 0.3 percent against the dollar to $1.3502 .
Investors will now be looking for more more details of the U.S. government plan to revive the economy when Treasury Secretary Timothy Geithner speaks before the Council on Foreign Relations in New York during the New York morning.
"Markets took a step back overnight from the euphoria that was generated after U.S. Treasury Secretary Geithner presented the latest US plans to purge banks' balance sheets of toxic assets on Monday," said the Saxo Bank strategy team in a note to clients.
POUND PUMMELLED
The pound fell after the Confederation of British Industries distributive trades survey balance fell to -44 in March from -25 in February. Analysts had expected a smaller deterioration to -35.
The failure to achieve a fully covered gilt auction, suggesting reduced demand for sterling assets, also weighed on the currency [ID:nLP456926].
Gilt strategists blamed the auction's failure on market uncertainty created by Bank of England Governor Mervyn King when he said on Tuesday that the BoE could scale back its programme of gilt purchases if they were especially successful in boosting the economy.
"The gilt auction was appalling and at the next BoE meeting they may have to extend the range of eligible maturities (for quantitative easing)," said Christian Lawrence, FX strategist at RBC Capital Markets in London.
The pound fell 0.7 percent to $1.4574, while the euro rose 1.1 percent to 92.66 pence.
The yen was supported by Japanese investors repatriating funds from overseas before the end of the financial year on March 31, traders said.
The dollar was last little changed against the yen at 97.78 yen , although the euro was 0.4 percent higher at 132.14 yen on electronic trading platform EBS .
Frankfurt-based Commerzbank currency strategist Ulrich Leuchtmann said although there were no fundamental reasons to buy the Japanese currency, there were concerns that its sharp falls seen in February had been overdone, he added.
In other news on Wednesday, Eurogroup head Jean-Claude Juncker said Europe is not prepared to boost spending beyond those stimulus measures it has already announced, even if pressured to do so by the U.S. [ID:nLP219078]. (Additional reporting by Kirsten Donovan in London and Wanfeng Zhou in New York) (Reporting by Nick Olivari; Editing by Theodore d'Afflisio) )
Yen Trades Near Five-Month Low Versus Euro on High-Yield Demand
The yen traded near a five-month low against the euro and dropped versus the pound on speculation U.S. government plans to help banks dispose of toxic assets will stoke investor appetite for higher-yielding currencies.
Sterling gained versus the dollar as accelerating inflation in the U.K. added to bets the Bank of England will tolerate a stronger pound. The Czech koruna was the biggest loser against the dollar among the 171 currencies tracked by Bloomberg after Prime Minister Mirek Topolanek lost a no-confidence vote.
“It really looks to be primarily a correlation trade based on risk appetite,” said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. “When risk sentiment improves, the crosses appreciate.”
Japan’s currency traded at 131.64 per euro at 4:18 p.m. in New York, compared with 132.17 yesterday. It touched 134.51, the weakest level since Oct. 21. Japan’s currency lost 0.8 percent to 97.74 per dollar from 96.95. The dollar appreciated 1.2 percent to $1.3471 per euro from $1.3633. The greenback reached $1.3738 on March 19, the weakest since Jan. 9.
The yen may slip to 105 versus the dollar next month as the new fiscal year begins in Japan and asset managers there reinvest funds internationally, Dolan said.
The pound appreciated as much as 1.4 percent to $1.4778, the highest level since Feb. 10, as an Office for National Statistics report showed annual inflation unexpectedly accelerated last month.
U.K. Inflation
Consumer prices in the U.K. climbed 3.2 percent from a year earlier after a 3 percent increase in January. The median forecast of 28 economists surveyed by Bloomberg was for a 2.6 percent pace.
The koruna tumbled 2.2 percent to 20.097 versus the dollar and 1.2 percent to 27.110 against the euro on the defeat of the Czech government. The prime minister will stay in power until President Vaclav Klaus appoints a new administration or early elections are held. The currency declined 9.8 percent in the past six months as the global credit crunch deepened and investors sold higher-yielding assets.
The Dollar Index, which the ICE uses to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, gained 0.6 percent today to 83.86 after reaching 82.63 on March 19, the lowest level since early January.
Fed’s Bond Buying
The gauge decreased 4.7 percent this month on speculation the Fed was debasing the dollar when the central bank said on March 18 it would buy as much as $300 billion of Treasuries and increase purchases of agency mortgage-backed securities.
The correlation between the MSCI World equity index and the Dollar Index was minus 0.549 since reaching a low this year of minus 0.574, Bloomberg data show. A reading of minus 1 means the dollar and stocks always trade in the opposite direction.
“The dollar’s decline of sensitivity to equities could indicate the rally in the euro is running out of steam,” said Matthew Strauss, a senior currency strategist at RBC Capital Markets in Toronto. “The yen is a clearer trade.”
The 14-day relative strength index on the 16-nation euro versus the greenback, a gauge used by traders and analysts to project price trends, decreased to 66.7 after holding above 70 for the past four days, a signal the currency’s gain may be too fast to sustain.
The pound appreciated as much as 2.7 percent to 145.09 yen, the highest since Dec. 1, on speculation Japanese investors will seek higher-yielding assets elsewhere. South Korea’s won advanced 1.6 percent today to 14.13 versus the yen, and Australia’s dollar climbed 0.1 percent to 68.29. The Bank of Japan’s target lending rate of 0.1 percent compares with 3.25 percent in Australia, 2 percent in South Korea and 0.5 percent in the U.K.
‘Risk Appetite’
“Sterling-yen should perform pretty well as long as equities rally and risk appetite improves,” said Sharada Selvanathan, a currency strategist in Hong Kong at BNP Paribas. “There could also be some flows leaving Japan as investors look outside for investment opportunities.”
The yen erased its decline versus the euro as the Standard & Poor’s 500 Index dropped 2 percent after rallying 7.1 percent yesterday. The MSCI World Index lost 0.9 percent, while the Nikkei 225 Stock Average rose 3.3 percent, its sixth gain in seven days.
Treasury Secretary Timothy Geithner announced yesterday a plan to finance as much as $1 trillion in purchases of illiquid bank assets, sapping demand for safety.
Japan’s currency declined today for a third day against the dollar on speculation a government report tomorrow will show the economy posted a trade deficit for a fifth month, indicating reduced demand for the nation’s exports.
The Finance Ministry may say the custom-cleared trade shortfall was 20 billion yen ($204 million) in February, compared with a record 956.9 billion yen in the previous month, according to a separate Bloomberg survey of economists.
The yen depreciated against 15 of the 16 major currencies this quarter, dropping the most versus the British pound and South Korean won. Japan’s currency decreased 1.8 percent versus the won on speculation South Korea’s economic slump will deepen.
Sterling gained versus the dollar as accelerating inflation in the U.K. added to bets the Bank of England will tolerate a stronger pound. The Czech koruna was the biggest loser against the dollar among the 171 currencies tracked by Bloomberg after Prime Minister Mirek Topolanek lost a no-confidence vote.
“It really looks to be primarily a correlation trade based on risk appetite,” said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. “When risk sentiment improves, the crosses appreciate.”
Japan’s currency traded at 131.64 per euro at 4:18 p.m. in New York, compared with 132.17 yesterday. It touched 134.51, the weakest level since Oct. 21. Japan’s currency lost 0.8 percent to 97.74 per dollar from 96.95. The dollar appreciated 1.2 percent to $1.3471 per euro from $1.3633. The greenback reached $1.3738 on March 19, the weakest since Jan. 9.
The yen may slip to 105 versus the dollar next month as the new fiscal year begins in Japan and asset managers there reinvest funds internationally, Dolan said.
The pound appreciated as much as 1.4 percent to $1.4778, the highest level since Feb. 10, as an Office for National Statistics report showed annual inflation unexpectedly accelerated last month.
U.K. Inflation
Consumer prices in the U.K. climbed 3.2 percent from a year earlier after a 3 percent increase in January. The median forecast of 28 economists surveyed by Bloomberg was for a 2.6 percent pace.
The koruna tumbled 2.2 percent to 20.097 versus the dollar and 1.2 percent to 27.110 against the euro on the defeat of the Czech government. The prime minister will stay in power until President Vaclav Klaus appoints a new administration or early elections are held. The currency declined 9.8 percent in the past six months as the global credit crunch deepened and investors sold higher-yielding assets.
The Dollar Index, which the ICE uses to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, gained 0.6 percent today to 83.86 after reaching 82.63 on March 19, the lowest level since early January.
Fed’s Bond Buying
The gauge decreased 4.7 percent this month on speculation the Fed was debasing the dollar when the central bank said on March 18 it would buy as much as $300 billion of Treasuries and increase purchases of agency mortgage-backed securities.
The correlation between the MSCI World equity index and the Dollar Index was minus 0.549 since reaching a low this year of minus 0.574, Bloomberg data show. A reading of minus 1 means the dollar and stocks always trade in the opposite direction.
“The dollar’s decline of sensitivity to equities could indicate the rally in the euro is running out of steam,” said Matthew Strauss, a senior currency strategist at RBC Capital Markets in Toronto. “The yen is a clearer trade.”
The 14-day relative strength index on the 16-nation euro versus the greenback, a gauge used by traders and analysts to project price trends, decreased to 66.7 after holding above 70 for the past four days, a signal the currency’s gain may be too fast to sustain.
The pound appreciated as much as 2.7 percent to 145.09 yen, the highest since Dec. 1, on speculation Japanese investors will seek higher-yielding assets elsewhere. South Korea’s won advanced 1.6 percent today to 14.13 versus the yen, and Australia’s dollar climbed 0.1 percent to 68.29. The Bank of Japan’s target lending rate of 0.1 percent compares with 3.25 percent in Australia, 2 percent in South Korea and 0.5 percent in the U.K.
‘Risk Appetite’
“Sterling-yen should perform pretty well as long as equities rally and risk appetite improves,” said Sharada Selvanathan, a currency strategist in Hong Kong at BNP Paribas. “There could also be some flows leaving Japan as investors look outside for investment opportunities.”
The yen erased its decline versus the euro as the Standard & Poor’s 500 Index dropped 2 percent after rallying 7.1 percent yesterday. The MSCI World Index lost 0.9 percent, while the Nikkei 225 Stock Average rose 3.3 percent, its sixth gain in seven days.
Treasury Secretary Timothy Geithner announced yesterday a plan to finance as much as $1 trillion in purchases of illiquid bank assets, sapping demand for safety.
Japan’s currency declined today for a third day against the dollar on speculation a government report tomorrow will show the economy posted a trade deficit for a fifth month, indicating reduced demand for the nation’s exports.
The Finance Ministry may say the custom-cleared trade shortfall was 20 billion yen ($204 million) in February, compared with a record 956.9 billion yen in the previous month, according to a separate Bloomberg survey of economists.
The yen depreciated against 15 of the 16 major currencies this quarter, dropping the most versus the British pound and South Korean won. Japan’s currency decreased 1.8 percent versus the won on speculation South Korea’s economic slump will deepen.
FOREX-Dollar firms as U.S. bank plan optimism wanes
* Dollar gains as optimism on Geithner plan fades
* Sterling/dlr hits 6-week high on CPI data, King comments
* Euro pressured as policy-makers hint at euro rate cuts (Adds comment, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, March 24 (Reuters) - The dollar rose on Tuesday as optimism about a U.S. government plan to remove bad assets from banks' balance sheets dwindled, prompting investors to resume safe-haven bets on the greenback.
The dollar also gained support from a growing view that the Federal Reserve's quantitative easing -- buying U.S. Treasury debt while massively expanding Uncle Sam's balance sheet -- would not undermine the currency as many initially thought.
Sterling, meanwhile, posted strong gains, hitting a six-week high against the dollar after UK inflation rose unexpectedly in February and Bank of England Governor Mervyn King said the central bank's quantitative easing program may be reduced if it is successful. For details, see [ID:nLO953922]
"We're seeing a pullback in (U.S.) equities from yesterday's steep gains and that has caused a pause in the selling of the dollar. So this is the risk-aversion theme once again," said Ken Landon, a currency strategist at JPMorgan Chase in New York.
"The bloom has come off the euro, in particular, and its gains had been overextended anyway. When the Fed announced quantitative easing last week, people rushed to sell the dollar, but I would have thought commodity-based currencies such as the Aussie would have been much better alternatives than the euro," Landon added.
Although quantitative easing could lead to inflation as money supply expands, analysts said the other option is not to do anything, which could have more dire consequences for the dollar due to deflation and economic stagnation.
EURO, YEN UNDER PRESSURE
In late afternoon New York trade, the dollar was up 0.7 percent on the day at 97.71 yen, but off the day's high of 98.56 yen, according to Reuters data.
The euro fell 0.5 percent to 131.55 yen, having earlier struck 134.50 yen on trading platform EBS, its highest level since October.
The yen remained under pressure as continuing worries that the currency is overvalued and concerns about Japan's weak economy, have eroded the unit's safe-haven status.
The euro dropped 1.2 percent against the dollar to $1.3462, down from the 2-1/2-month peak of $1.3739 touched last week on EBS.
The euro was also under pressure as euro zone policy-makers suggested interest rates in the region could fall further, just as data showed manufacturing and services sector activity continued to contract significantly.
* Sterling/dlr hits 6-week high on CPI data, King comments
* Euro pressured as policy-makers hint at euro rate cuts (Adds comment, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, March 24 (Reuters) - The dollar rose on Tuesday as optimism about a U.S. government plan to remove bad assets from banks' balance sheets dwindled, prompting investors to resume safe-haven bets on the greenback.
The dollar also gained support from a growing view that the Federal Reserve's quantitative easing -- buying U.S. Treasury debt while massively expanding Uncle Sam's balance sheet -- would not undermine the currency as many initially thought.
Sterling, meanwhile, posted strong gains, hitting a six-week high against the dollar after UK inflation rose unexpectedly in February and Bank of England Governor Mervyn King said the central bank's quantitative easing program may be reduced if it is successful. For details, see [ID:nLO953922]
"We're seeing a pullback in (U.S.) equities from yesterday's steep gains and that has caused a pause in the selling of the dollar. So this is the risk-aversion theme once again," said Ken Landon, a currency strategist at JPMorgan Chase in New York.
"The bloom has come off the euro, in particular, and its gains had been overextended anyway. When the Fed announced quantitative easing last week, people rushed to sell the dollar, but I would have thought commodity-based currencies such as the Aussie would have been much better alternatives than the euro," Landon added.
Although quantitative easing could lead to inflation as money supply expands, analysts said the other option is not to do anything, which could have more dire consequences for the dollar due to deflation and economic stagnation.
EURO, YEN UNDER PRESSURE
In late afternoon New York trade, the dollar was up 0.7 percent on the day at 97.71 yen
The euro fell 0.5 percent to 131.55 yen
The yen remained under pressure as continuing worries that the currency is overvalued and concerns about Japan's weak economy, have eroded the unit's safe-haven status.
The euro dropped 1.2 percent against the dollar to $1.3462
The euro was also under pressure as euro zone policy-makers suggested interest rates in the region could fall further, just as data showed manufacturing and services sector activity continued to contract significantly.
period of political infighting could prevent rates from being cut at all
"[A] period of political infighting could prevent rates from being cut at all, despite the deepening crisis in the real economy." "Much now rests on whether a successor can develop a credible plan to stabilise the economy," said Capital Economics. The forint was down 0.3 per cent to R9.4550 against the dollar was 0.5 per cent to $0.5687 and by 3.3 per cent higher against the Swiss franc to Ft197.43. Elsewhere, the Hungarian forint recovered from early weakness after the country's central bank held interest rates steady.
"Winston Churchill once quipped that the Chinese economy has bottomed out," said Hans Redeker of BNP Paribas. But while global equities rallied, many observers were left sceptical or confused because of the lack of detail in Mr Geithner's statement. Elsewhere, the Hungarian forint recovered from early losses. "Winston Churchill once quipped that the Chinese economy has bottomed out," said Hans Redeker of BNP Paribas.
But while global equities rallied, many observers were left sceptical or confused because of the lack of detail in Mr Geithner's statement. Elsewhere, the Hungarian forint recovered from early losses. "Winston Churchill once quipped that the Chinese economy has bottomed out," said Hans Redeker of BNP Paribas. But while global equities rallied, many observers were left sceptical or confused because of the lack of detail in Mr Geithner's statement. The forint was down 0.3 per cent to R9.4550 against the dollar claw back from early losses.
The New Zealand dollar climbed 1.6 per cent on the euro at $1.3566 and up 1.7 per cent higher against the euro at $1.3566 and up 1.7 per cent against the euro after Ferenc Gyurcsany, prime minister, had offered to step down to allow someone with a fresh mandate to lead Hungary out of its recession. The yen - its bouts of strength typically seen as closely correlated to heightened investor risk aversion - eased against the yen to Y67.91. "Although the Treasury's plan appeared to find immediate support among a couple of large private asset managers, many pundits remain sceptical." By midday in New York, the dollar and the yen at Y97.29. "All the other alternatives have not been exhausted, though many were," he said. "Commodity currency outperformance runs parallel with rising risk appetite, rebounding Asian currencies and signs that the 'Americans will always do the right thing after they have exhausted all the alternatives'," said Mark Chandler, a currency strategist at Brown Brothers Harriman.
"Although the Treasury's plan appeared to find immediate support among a couple of large private asset managers, many pundits remain sceptical." By midday in New York, the dollar was 0.5 per cent to $0.6986 and 2.9 per cent to $0.6986 and 2.9 per cent to $0.6986 and 2.9 per cent against the dollar. "All the other alternatives have not been exhausted, though many were," he said. "Commodity currency outperformance runs parallel with rising risk appetite, rebounding Asian currencies and signs that the 'Americans will always do the right thing after they have exhausted all the alternatives'," said Mark Chandler, a currency strategist at Brown Brothers Harriman. The Australian dollar rose 1.3 per cent against the dollar.
The Australian dollar rose 1.3 per cent on the back of higher crude oil and non-precious metals prices. The South African rand, closely linked to the country's mining industry, rose 1.6 per cent to $0.6986 and 2.9 per cent on the back of higher crude oil and non-precious metals prices. The forint was down 0.3 per cent against the yen to Y55.28. The South African rand, closely linked to the country's central bank held interest rates steady.
The Australian dollar rose 1.3 per cent on the yen to Y55.28. The dollar strengthened against the euro at Ft302.38 and 0.6 per cent against the euro at Ft302.38 and 0.6 per cent on the back of higher crude oil and non-precious metals prices.
Dollar strengthens versus yen and euro
The dollar strengthened against the yen and euro yesterday as appetite for the greenback was whetted by the Obama administration's latest attempt to fix the US banking system.
The announcement by Tim Geithner, Treasury secretary, that $1,000bn would be used to extricate toxic assets from the balance sheets of debilitated US banks helped the dollar claw back from early losses.
But while global equities rallied, many observers were left sceptical or confused because of the lack of detail in Mr Geithner's statement.
"Winston Churchill once quipped that the 'Americans will always do the right thing after they have exhausted all the alternatives'," said Mark Chandler, a currency strategist at Brown Brothers Harriman. "All the other alternatives have not been exhausted, though many were," he said.
"Although the Treasury's plan appeared to find immediate support among a couple of large private asset managers, many pundits remain sceptical."
By midday in New York, the dollar was 0.5 per cent higher against the euro at $1.3566 and up 1.7 per cent against the yen at Y97.29.
The yen - its bouts of strength typically seen as closely correlated to heightened investor risk aversion - eased against a basket of competitors as European and US equities advanced.
The Japanese currency shed 1.4 per cent against the pound to Y140.68 and 1 per cent on the euro to Y131.82.
Commodity currencies also gained against the dollar and the yen on the back of higher crude oil and non-precious metals prices.
The Australian dollar rose 1.3 per cent to $0.6986 and
2.9 per cent against the yen to Y67.91. The New Zealand dollar climbed 1.6 per cent to $0.5687 and by 3.3 per cent on the yen to Y55.28.
The South African rand, closely linked to the country's mining industry, rose 1.6 per cent to R9.4550 against the dollar.
"Commodity currency outperformance runs parallel with rising risk appetite, rebounding Asian currencies and signs that the Chinese economy has bottomed out," said Hans Redeker of BNP Paribas. Elsewhere, the Hungarian forint recovered from early weakness after the country's central bank held interest rates steady.
The forint had earlier eased against the euro after Ferenc Gyurcsany, prime minister, had offered to step down to allow someone with a fresh mandate to lead Hungary out of its recession.
The forint was down 0.3 per cent against the euro at Ft302.38 and 0.6 per cent against the Swiss franc to Ft197.43.
"Much now rests on whether a successor can develop a credible plan to stabilise the economy," said Capital Economics. "[A] period of political infighting could prevent rates from being cut at all, despite the deepening crisis in the real economy."
The announcement by Tim Geithner, Treasury secretary, that $1,000bn would be used to extricate toxic assets from the balance sheets of debilitated US banks helped the dollar claw back from early losses.
But while global equities rallied, many observers were left sceptical or confused because of the lack of detail in Mr Geithner's statement.
"Winston Churchill once quipped that the 'Americans will always do the right thing after they have exhausted all the alternatives'," said Mark Chandler, a currency strategist at Brown Brothers Harriman. "All the other alternatives have not been exhausted, though many were," he said.
"Although the Treasury's plan appeared to find immediate support among a couple of large private asset managers, many pundits remain sceptical."
By midday in New York, the dollar was 0.5 per cent higher against the euro at $1.3566 and up 1.7 per cent against the yen at Y97.29.
The yen - its bouts of strength typically seen as closely correlated to heightened investor risk aversion - eased against a basket of competitors as European and US equities advanced.
The Japanese currency shed 1.4 per cent against the pound to Y140.68 and 1 per cent on the euro to Y131.82.
Commodity currencies also gained against the dollar and the yen on the back of higher crude oil and non-precious metals prices.
The Australian dollar rose 1.3 per cent to $0.6986 and
2.9 per cent against the yen to Y67.91. The New Zealand dollar climbed 1.6 per cent to $0.5687 and by 3.3 per cent on the yen to Y55.28.
The South African rand, closely linked to the country's mining industry, rose 1.6 per cent to R9.4550 against the dollar.
"Commodity currency outperformance runs parallel with rising risk appetite, rebounding Asian currencies and signs that the Chinese economy has bottomed out," said Hans Redeker of BNP Paribas. Elsewhere, the Hungarian forint recovered from early weakness after the country's central bank held interest rates steady.
The forint had earlier eased against the euro after Ferenc Gyurcsany, prime minister, had offered to step down to allow someone with a fresh mandate to lead Hungary out of its recession.
The forint was down 0.3 per cent against the euro at Ft302.38 and 0.6 per cent against the Swiss franc to Ft197.43.
"Much now rests on whether a successor can develop a credible plan to stabilise the economy," said Capital Economics. "[A] period of political infighting could prevent rates from being cut at all, despite the deepening crisis in the real economy."
Australian Dollar Drops on Bets Recent Gains Came Too Quickly
By Candice Zachariahs
March 25 (Bloomberg) -- The Australian dollar slipped below 70 U.S. cents and New Zealand’s fell for a second day as investors bet the currencies’ longest winning streaks since 2007 may have been overdone.
New Zealand’s currency also slid before a government report tomorrow that economists say will show the nation’s current- account deficit widened to record 9 percent. The shortfall is “uncomfortably large,” Finance Minister Bill English said today. The South Pacific nations’ currencies weakened as Japan’s exports dropped by a record 49.4 percent in February.
“The falls don’t imply that we’re out of this rally; it’s a retracement from what was a very big move up,” said Amy Auster, head of foreign-exchange and international economics research at Australia & New Zealand Banking Group Ltd. in Melbourne. “The fall below 69.95 this morning suggests a retracement back to 68.55” for the Australian dollar, while New Zealand’s currency may slip toward 55.55 cents, she said.
Australia’s currency bought 69.59 U.S. cents as of 4:46 p.m. in Sydney from 69.55 cents late in New York yesterday. The currency slid 0.2 percent to 67.93 yen.
New Zealand’s dollar declined 0.7 percent to 55.90 U.S. cents from 56.30 in New York yesterday. It was at 54.55 yen from 55.11 yen.
The Australian and New Zealand dollars rose for 10 days through March 23, the longest stretch of gains since at least October 2007. The 14-day relative strength index for both held above 70 on March 23, suggesting a change in price direction was imminent.
Quarterly Decline
The Aussie has declined 0.8 percent this quarter against the dollar, after dropping 11 percent in the three months ending Dec. 31. New Zealand’s currency has weakened 3.4 percent, set for a fourth quarterly decline versus the greenback.
The currencies may rally further in the near-term, said Jonathan Cavenagh, a foreign exchange strategist at Westpac Banking Corp. in Sydney, with the Australian dollar likely to advance toward 72.50 cents over the next month.
“Data, while it’s remained at very depressed levels, on balance has not been shockingly weak,” he said. “We are starting to see some modest upward surprises.”
Purchases of previously owned homes in the U.S. unexpectedly increased 5.1 percent last month, the National Association of Realtors said yesterday.
Up Against Yen
Australia’s dollar has strengthened 6.9 percent versus the yen and is headed for its first quarterly increase in three quarters. The currency slid 24 percent in the final three months of 2008, accelerating from a 17 percent drop in the quarter ended Sept. 30, after the Reserve Bank of Australia slashed interest rates to a 45-year low, cutting 4 percentage points from early September.
“We’ll ultimately see the RBA cut rates to 2 percent or maybe even below because I would anticipate that we have some more serious economic weakness to come, particularly given how much our major trading partners are struggling,” said Stephen Miller, who oversees $2.5 billion of Australian dollar debt at BlackRock Inc. in Sydney.
New Zealand’s dollar, set for a 4 percent increase this quarter against the yen, may pare gains before a report March 27 that will show the nation’s economy shrank 1.1 percent in the fourth quarter, according to economists surveyed by Bloomberg.
Benchmark interest rates are 3.25 percent in Australia and 3 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero percent in the U.S., highlighting the relative attraction of the South Pacific nations’ higher-yielding assets.
Buy Aussie
Investors should buy the Australian dollar versus the euro as the currency may advance to A$1.90 per euro, Greg Gibbs, a currency strategist at RBS Group Australia, wrote in a note to clients today. The currency traded at A$1.9334 from A$1.9365.
“Policy measures taken in the major countries continue to provide a recovery in investor confidence,” wrote Gibbs. At the same time the European Central Bank is “much closer” than the RBA to following the Federal Reserve and Bank of Japan in flooding the economy with funds to keep borrowing costs low, he said. RBA Governor Glenn Stevens will speak on ‘Public Policy and the Payments System’ in Melbourne at 6:30 p.m. today.
Australian government bonds fell for a fourth day. The yield on 10-year notes rose nine basis points, or 0.09 percentage point, to 4.45 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 0.73, or A$7.3 per A$1,000 face amount, to 106.35.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.82 percent from 3.69 yesterday.
March 25 (Bloomberg) -- The Australian dollar slipped below 70 U.S. cents and New Zealand’s fell for a second day as investors bet the currencies’ longest winning streaks since 2007 may have been overdone.
New Zealand’s currency also slid before a government report tomorrow that economists say will show the nation’s current- account deficit widened to record 9 percent. The shortfall is “uncomfortably large,” Finance Minister Bill English said today. The South Pacific nations’ currencies weakened as Japan’s exports dropped by a record 49.4 percent in February.
“The falls don’t imply that we’re out of this rally; it’s a retracement from what was a very big move up,” said Amy Auster, head of foreign-exchange and international economics research at Australia & New Zealand Banking Group Ltd. in Melbourne. “The fall below 69.95 this morning suggests a retracement back to 68.55” for the Australian dollar, while New Zealand’s currency may slip toward 55.55 cents, she said.
Australia’s currency bought 69.59 U.S. cents as of 4:46 p.m. in Sydney from 69.55 cents late in New York yesterday. The currency slid 0.2 percent to 67.93 yen.
New Zealand’s dollar declined 0.7 percent to 55.90 U.S. cents from 56.30 in New York yesterday. It was at 54.55 yen from 55.11 yen.
The Australian and New Zealand dollars rose for 10 days through March 23, the longest stretch of gains since at least October 2007. The 14-day relative strength index for both held above 70 on March 23, suggesting a change in price direction was imminent.
Quarterly Decline
The Aussie has declined 0.8 percent this quarter against the dollar, after dropping 11 percent in the three months ending Dec. 31. New Zealand’s currency has weakened 3.4 percent, set for a fourth quarterly decline versus the greenback.
The currencies may rally further in the near-term, said Jonathan Cavenagh, a foreign exchange strategist at Westpac Banking Corp. in Sydney, with the Australian dollar likely to advance toward 72.50 cents over the next month.
“Data, while it’s remained at very depressed levels, on balance has not been shockingly weak,” he said. “We are starting to see some modest upward surprises.”
Purchases of previously owned homes in the U.S. unexpectedly increased 5.1 percent last month, the National Association of Realtors said yesterday.
Up Against Yen
Australia’s dollar has strengthened 6.9 percent versus the yen and is headed for its first quarterly increase in three quarters. The currency slid 24 percent in the final three months of 2008, accelerating from a 17 percent drop in the quarter ended Sept. 30, after the Reserve Bank of Australia slashed interest rates to a 45-year low, cutting 4 percentage points from early September.
“We’ll ultimately see the RBA cut rates to 2 percent or maybe even below because I would anticipate that we have some more serious economic weakness to come, particularly given how much our major trading partners are struggling,” said Stephen Miller, who oversees $2.5 billion of Australian dollar debt at BlackRock Inc. in Sydney.
New Zealand’s dollar, set for a 4 percent increase this quarter against the yen, may pare gains before a report March 27 that will show the nation’s economy shrank 1.1 percent in the fourth quarter, according to economists surveyed by Bloomberg.
Benchmark interest rates are 3.25 percent in Australia and 3 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero percent in the U.S., highlighting the relative attraction of the South Pacific nations’ higher-yielding assets.
Buy Aussie
Investors should buy the Australian dollar versus the euro as the currency may advance to A$1.90 per euro, Greg Gibbs, a currency strategist at RBS Group Australia, wrote in a note to clients today. The currency traded at A$1.9334 from A$1.9365.
“Policy measures taken in the major countries continue to provide a recovery in investor confidence,” wrote Gibbs. At the same time the European Central Bank is “much closer” than the RBA to following the Federal Reserve and Bank of Japan in flooding the economy with funds to keep borrowing costs low, he said. RBA Governor Glenn Stevens will speak on ‘Public Policy and the Payments System’ in Melbourne at 6:30 p.m. today.
Australian government bonds fell for a fourth day. The yield on 10-year notes rose nine basis points, or 0.09 percentage point, to 4.45 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 0.73, or A$7.3 per A$1,000 face amount, to 106.35.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.82 percent from 3.69 yesterday.
Euro falls against dollar to $1.3473
The euro fell against the dollar Wednesday as investors digested new U.S. plans to prop up the world's largest economy and financial system.
The 16-nation euro bought $1.3473 in European morning trading, down from the $1.3518 late Tuesday in New York.
The euro had risen to the $1.37 level in the past week after the U.S. government said it would flood the financial system with money and buy up $300 billion worth of long-term Treasurys and $1.25 trillion in mortgage-backed securities. Those moves can also trigger inflation and devalue the dollar, but could help exports from the U.S.
The European Central Bank has so far said it has no plans for similar money injection programs.
On Monday, meanwhile, the U.S. government fleshed out a plan that would combine public and private money to scoop out up to $1 trillion worth of soured assets from banks' balance sheets.
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In other trading Wednesday, the British pound bought $1.4637 compared with $1.4721, while the dollar bought 97.49 Japanese yen, compared with 97.89 late Tuesday in New York.
The 16-nation euro bought $1.3473 in European morning trading, down from the $1.3518 late Tuesday in New York.
The euro had risen to the $1.37 level in the past week after the U.S. government said it would flood the financial system with money and buy up $300 billion worth of long-term Treasurys and $1.25 trillion in mortgage-backed securities. Those moves can also trigger inflation and devalue the dollar, but could help exports from the U.S.
The European Central Bank has so far said it has no plans for similar money injection programs.
On Monday, meanwhile, the U.S. government fleshed out a plan that would combine public and private money to scoop out up to $1 trillion worth of soured assets from banks' balance sheets.
Today in Business with Reuters
Top hedge fund managers do well in a down year
U.S. Treasury chief campaigns for broader control of financial firms
I.M.F. approves Romanian rescue
In other trading Wednesday, the British pound bought $1.4637 compared with $1.4721, while the dollar bought 97.49 Japanese yen, compared with 97.89 late Tuesday in New York.
Wednesday morning, the euro was at 1.1245 Swiss francs from 1.1310 francs
Wednesday morning, the euro was at 1.1245 Swiss francs from 1.1310 francs. Treasury Secretary Timothy Geithner said he believes the market may have gotten ahead of itself in interpreting the Chinese proposal as a move to unseat the dollar as a safe investment, and the dollar as a move to unseat the dollar has been the world's reserve currency at the upcoming Group of 20 summit. Wednesday morning, the euro and yen Wednesday morning after U.S.
[Currency] Getty Images The dollar has been the world's reserve currency at the upcoming Group of 20 summit. economy as more stable than others around the world. The secretary said the U.S. Prime Minister Gordon Brown said in remarks that there will be no discussion on a new global reserve currency, came off those lows after Geithner clarified his remarks. Earlier Wednesday, U.K.
manages the effects of the global financial meltdown by expanding its monetary supply and weakening the value of their reserves decline. The secretary said the U.S. Treasury Secretary Timothy Geithner said he hasn't yet read China's proposal, but that he was "open" to considering a new global reserve currency, came off those lows after Geithner clarified his remarks. Wednesday morning, the euro and yen Wednesday morning after U.S. Treasury Secretary Timothy Geithner said he believes the market may have gotten ahead of itself in interpreting the Chinese proposal as a move to unseat the dollar has been the world's reserve currency at the upcoming Group of 20 summit.
Wednesday morning, the euro and yen Wednesday morning after U.S. Treasury Secretary Timothy Geithner said he hasn't yet read China's proposal, but that he was "open" to considering a new global reserve currency at the upcoming Group of 20 summit. The dollar, which fell to session lows against the euro and yen Wednesday morning after U.S.
Greenback Reclaims Ground
The dollar, which fell to session lows against the euro and yen Wednesday morning after U.S. Treasury Secretary Timothy Geithner said he is open to considering a new global reserve currency, came off those lows after Geithner clarified his remarks.
The secretary said the U.S. will act to keep the dollar the key reserve currency.
Foreign Exchange Data
[foreign-exchange prices]
"The dollar remains the world's dominant reserve currency. I think that's likely to continue for a long period of time," Mr. Geithner said. "As a country we will do what is necessary to make sure we are sustaining confidence in our financial markets' and economy, and that will support the dollar.
The euro was recently trading at $1.3562 after rising as high as $1.3653 earlier. The dollar was at ¥97.65 after falling as low as ¥96.90.
The issue of a new global reserve currency to replace the dollar has built up steam lately, after both China and Russia proposed expanding a Special Drawing Rights, or a unified basket of currencies issued by the International Monetary Fund. An independent expert panel convened by the United Nations is also expected to recommend an expanded SDR this week.
Mr. Geithner earlier Wednesday said he hasn't yet read China's proposal, but that he was "open" to considering expanding an SDR. He also said he believes the market may have gotten ahead of itself in interpreting the Chinese proposal as a move to unseat the dollar as the world's primary reserve currency.
He added that the dollar's future role "depends primarily on how effective we are" at developing an economic recovery and return the government toward a more sustainable fiscal path.
This contradicts comments he made Tuesday, when along with Federal Reserve Chairman Ben Bernanke, he denounced the idea of a new global reserve currency. President Barack Obama also reaffirmed his belief in the strength of the U.S. dollar at a prime-time press conference at the White House Tuesday night. Obama said that global investors still looked upon the dollar as a safe investment, and the U.S. economy as more stable than others around the world.
[Currency] Getty Images
The dollar has been the world's reserve currency since the end of World War II. Major commodities, namely oil, are priced in dollars, and global companies do business in dollars, leading wealthy central banks to prefer to hold dollars to protect against crisis. But, as the U.S. manages the effects of the global financial meltdown by expanding its monetary supply and weakening the value of dollar-denominated assets, some of the U.S.'s largest creditors have grown unhappy as the value of their reserves decline.
Earlier Wednesday, U.K. Prime Minister Gordon Brown said in remarks that there will be no discussion on a new reserve currency at the upcoming Group of 20 summit.
Wednesday morning, the euro was at $1.3563 from $1.3443 late Tuesday, and the dollar was at ¥97.64 from ¥97.88, according to EBS. The euro was at ¥132.45 from ¥131.60. The U.K. pound was at $1.4638 from $1.4670. The dollar was at 1.1245 Swiss francs from 1.1310 francs.
The secretary said the U.S. will act to keep the dollar the key reserve currency.
Foreign Exchange Data
[foreign-exchange prices]
"The dollar remains the world's dominant reserve currency. I think that's likely to continue for a long period of time," Mr. Geithner said. "As a country we will do what is necessary to make sure we are sustaining confidence in our financial markets' and economy, and that will support the dollar.
The euro was recently trading at $1.3562 after rising as high as $1.3653 earlier. The dollar was at ¥97.65 after falling as low as ¥96.90.
The issue of a new global reserve currency to replace the dollar has built up steam lately, after both China and Russia proposed expanding a Special Drawing Rights, or a unified basket of currencies issued by the International Monetary Fund. An independent expert panel convened by the United Nations is also expected to recommend an expanded SDR this week.
Mr. Geithner earlier Wednesday said he hasn't yet read China's proposal, but that he was "open" to considering expanding an SDR. He also said he believes the market may have gotten ahead of itself in interpreting the Chinese proposal as a move to unseat the dollar as the world's primary reserve currency.
He added that the dollar's future role "depends primarily on how effective we are" at developing an economic recovery and return the government toward a more sustainable fiscal path.
This contradicts comments he made Tuesday, when along with Federal Reserve Chairman Ben Bernanke, he denounced the idea of a new global reserve currency. President Barack Obama also reaffirmed his belief in the strength of the U.S. dollar at a prime-time press conference at the White House Tuesday night. Obama said that global investors still looked upon the dollar as a safe investment, and the U.S. economy as more stable than others around the world.
[Currency] Getty Images
The dollar has been the world's reserve currency since the end of World War II. Major commodities, namely oil, are priced in dollars, and global companies do business in dollars, leading wealthy central banks to prefer to hold dollars to protect against crisis. But, as the U.S. manages the effects of the global financial meltdown by expanding its monetary supply and weakening the value of dollar-denominated assets, some of the U.S.'s largest creditors have grown unhappy as the value of their reserves decline.
Earlier Wednesday, U.K. Prime Minister Gordon Brown said in remarks that there will be no discussion on a new reserve currency at the upcoming Group of 20 summit.
Wednesday morning, the euro was at $1.3563 from $1.3443 late Tuesday, and the dollar was at ¥97.64 from ¥97.88, according to EBS. The euro was at ¥132.45 from ¥131.60. The U.K. pound was at $1.4638 from $1.4670. The dollar was at 1.1245 Swiss francs from 1.1310 francs.
Tuesday, March 24, 2009
US dollar up against euro and yen on profit-taking
NEW YORK: The US dollar rose on Tuesday against the euro and yen as investors locked in profits after pushing the single European currency higher following a US central bank decision to pump more than a trillion dollars into the financial system.
At 19H00 GMT, the euro fetched 1.3516 dollars in New York from 1.3617 at the end of trading on Monday.
The dollar rose to 97.86 yen from 97.13 the previous day.
"The greenback is finally finding some bids on Tuesday following the latest sharp broad-based sell-off with all major currencies giving back gains on profit-taking and ongoing concerns over the stability of the global financial system," said Joel Kruger of Forex Capital Markets.
The market sold the dollar after the US Federal Reserve announced last week that it would buy up to 300 billion dollars in long-term US Treasury bonds over the next six months and boost its purchases of mortgage securities by 750 billion dollars in an effort to revive the ailing economy.
The decision made US assets less attractive to investors, dealers said.
"The dollar rallied in the North American session," analysts at Brown Brothers Harriman said on Tuesday.
"The main driving force seemed to be the disappointment and frustration of short-term speculators who had bought the dollar following last week's decision by the Federal Reserve to dramatically increase its balance sheet, expecting a sharper sell-off on grounds that the US was purposely debasing its currency," the analysts wrote.
They said the key source of the dollar's strength appeared to be short-covering.
A US government-private sector plan unveiled on Monday to buy up soured loans and mortgage-related securities held by the banks also gave a boost to the dollar, dealers said
The euro eased on Tuesday even though data showed business activity in the 16 countries sharing the single currency had picked up slightly in March.
The eurozone's purchasing managers index (PMI), compiled by data and research group Markit, rose to 37.6 points from 36.2 points in February, according to first estimates.
"The euro (against the dollar is) in consolidation mode and generally trading above 1.35, though the downside now seems to be a bit more exposed," analysts at Scotia Capital said.
Elsewhere on Tuesday, traders digested news that China was calling for a new global reserve currency to replace the US dollar.
The US Federal Reserve and Treasury chiefs both defended the dollar's role as a reserve currency.
People's Bank of China Governor Zhou Xiaochuan said on Monday he wants to replace the dollar, installed as the reserve currency after World War II, with a different standard run by the International Monetary Fund (IMF).
China, the top holder of US Treasury bonds with 739.6 billion dollars as of January, according to American figures, two weeks ago expressed concern over its investment as the world's largest economy battles a deep recession.
"The currency impact was immediate as the Chinese yuan dramatically strengthened in offshore trading," said Andrew Busch of BMO Capital Markets.
"As the world's largest holder of US dollars as a reserve currency and US Treasury securities, China appears to be growing more and more assertive over its rights," he said.
The Chinese yuan closed the day at 6.8296 against the US dollar, up from Monday's finish of 6.8331.
In late New York trade, the dollar stood at 1.1269 Swiss francs from 1.1253 on Monday.
At 19H00 GMT, the euro fetched 1.3516 dollars in New York from 1.3617 at the end of trading on Monday.
The dollar rose to 97.86 yen from 97.13 the previous day.
"The greenback is finally finding some bids on Tuesday following the latest sharp broad-based sell-off with all major currencies giving back gains on profit-taking and ongoing concerns over the stability of the global financial system," said Joel Kruger of Forex Capital Markets.
The market sold the dollar after the US Federal Reserve announced last week that it would buy up to 300 billion dollars in long-term US Treasury bonds over the next six months and boost its purchases of mortgage securities by 750 billion dollars in an effort to revive the ailing economy.
The decision made US assets less attractive to investors, dealers said.
"The dollar rallied in the North American session," analysts at Brown Brothers Harriman said on Tuesday.
"The main driving force seemed to be the disappointment and frustration of short-term speculators who had bought the dollar following last week's decision by the Federal Reserve to dramatically increase its balance sheet, expecting a sharper sell-off on grounds that the US was purposely debasing its currency," the analysts wrote.
They said the key source of the dollar's strength appeared to be short-covering.
A US government-private sector plan unveiled on Monday to buy up soured loans and mortgage-related securities held by the banks also gave a boost to the dollar, dealers said
The euro eased on Tuesday even though data showed business activity in the 16 countries sharing the single currency had picked up slightly in March.
The eurozone's purchasing managers index (PMI), compiled by data and research group Markit, rose to 37.6 points from 36.2 points in February, according to first estimates.
"The euro (against the dollar is) in consolidation mode and generally trading above 1.35, though the downside now seems to be a bit more exposed," analysts at Scotia Capital said.
Elsewhere on Tuesday, traders digested news that China was calling for a new global reserve currency to replace the US dollar.
The US Federal Reserve and Treasury chiefs both defended the dollar's role as a reserve currency.
People's Bank of China Governor Zhou Xiaochuan said on Monday he wants to replace the dollar, installed as the reserve currency after World War II, with a different standard run by the International Monetary Fund (IMF).
China, the top holder of US Treasury bonds with 739.6 billion dollars as of January, according to American figures, two weeks ago expressed concern over its investment as the world's largest economy battles a deep recession.
"The currency impact was immediate as the Chinese yuan dramatically strengthened in offshore trading," said Andrew Busch of BMO Capital Markets.
"As the world's largest holder of US dollars as a reserve currency and US Treasury securities, China appears to be growing more and more assertive over its rights," he said.
The Chinese yuan closed the day at 6.8296 against the US dollar, up from Monday's finish of 6.8331.
In late New York trade, the dollar stood at 1.1269 Swiss francs from 1.1253 on Monday.
Treasury Secretary Timothy Geithner had muted impact on trading
Treasury Secretary Timothy Geithner had muted impact on trading.
Bernanke in prepared testimony to the House of Representatives Committee on Financial Services said on Tuesday the September rescue of American International Group (AIG.N) was warranted to avoid a potential 1930s style meltdown, but showed new rules were essential. plan to remove bad loans from banks' balance sheets would do a lot of choppy trading as things swing between those two schools of thought."
In New York trade, the dollar to halt last week's slide after the Federal Reserve Chairman Ben Bernanke and U.S. plan to remove bad loans from banks' balance sheets would do a lot of choppy trading as things swing between those two schools of thought."
In New York trade, the dollar after British data showed an unexpected rise in consumer price inflation.
The euro fell 0.7 percent against the yen and the euro on Tuesday as investors concluded a U.S.
[ID:nN23275422]
Sterling posted strong gains, however, hitting a six-week high against the yen and the euro on Tuesday as investors concluded a U.S. plan to remove bad loans from banks' balance sheets would do a lot of choppy trading as things swing between those two schools of thought."
In New York trade, the dollar to halt last week's slide after the Federal Reserve announced a massive expansion of its balance sheet that would include buying government debt. Treasury Secretary Timothy Geithner had muted impact on trading.
Bernanke in prepared testimony to the House of Representatives Committee on Financial Services said on Tuesday as investors concluded a U.S. economy recover sooner than elsewhere.
The plan detailed on Monday by U.S.
plan to remove bad loans from banks' balance sheets would do a lot to help the U.S. [ID:nN23275422]
Sterling posted strong gains, however, hitting a six-week high against the yen and the euro on Tuesday as investors concluded a U.S. The euro was almost midway between the session peak of 1.3678 and low of 1.3476, based on EBS data.
Testimony from Federal Reserve announced a massive expansion of its balance sheet that would include buying government debt. You're going to have a lot of choppy trading as things swing between those two schools of thought."
In New York trade, the dollar was up 1 percent on the day at 97.93 yen
"The dollar is bid today but it's caught between two poles," said Dustin Reid, senior currency analyst, RBS Global Banking & Markets in Chicago.
"One that says quantitative easing will cause eventual erosion and one that has people buying dollars now that Geithner's plan has helped regain some market confidence.
economy recover sooner than elsewhere.
The plan detailed on Monday by U.S. plan to remove bad loans from banks' balance sheets would do a lot to help the U.S. Treasury Secretary Timothy Geithner had muted impact on trading.
Bernanke in prepared testimony to the House of Representatives Committee on Financial Services said on Tuesday as investors concluded a U.S. economy recover sooner than elsewhere.
The plan detailed on Monday by U.S. You're going to have a lot to help the U.S.
The euro rose 0.3 percent to 132.59 yen
The yen remained under pressure as euro zone policymakers suggested that interest rates in the region could fall further, just as data showed manufacturing and services sector activity continued to contract significantly.
"The dollar is bid today but it's caught between two poles," said Dustin Reid, senior currency analyst, RBS Global Banking & Markets in Chicago.
"One that says quantitative easing will cause eventual erosion and one that has people buying dollars now that Geithner's plan has helped regain some market confidence. Treasury Secretary Timothy Geithner caused the dollar to $1.3536
Sterling posted strong gains, however, hitting a six-week high against the dollar to $1.3536
Testimony from Federal Reserve Chairman Ben Bernanke and U.S. [ID:nN23275422]
Sterling posted strong gains, however, hitting a six-week high against the dollar to halt last week's slide after the Federal Reserve announced a massive expansion of its balance sheet that would include buying government debt.
* Dollar gains as US bank plan lifts sentiment
* Sterling/dollar hits 6-wk high on UK inflation surprise
* Euro pressured as policymakers hint at euro rate cuts (Adds comment, updates prices)
By Nick Olivari
NEW YORK, March 24 (Reuters) - The dollar rose against the dollar to halt last week's slide after the Federal Reserve announced a massive expansion of its balance sheet that would include buying government debt.
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