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FOREX-Dollar drops for 2nd day vs euro as investors embrace risk – Reuters UK news and update details. I hope you will find useful information for making trading decision today.
* Fed's Bernanke refrains from offering stimulus hint
* Surprise China rate cut boosts some riskier currencies
(Updates prices, adds quotes)
By Julie Haviv
NEW YORK, June 7 (Reuters) - The dollar fell against the
euro for a second straight day on Thursday after Federal Reserve
Chairman Ben Bernanke kept further stimulus measures on the
table and as China's central bank took action to boost growth,
spurring investors to embrace risk.
Trade was choppy, with the euro earlier hitting a two-week
high after China's central bank cut benchmark interest rates to
support growth in the world's second-largest economy.
Also on Thursday, the Fed's Bernanke said the U.S. central
bank was ready to shield the economy if financial troubles
mount, but offered few hints that further monetary stimulus was
imminent. Bernanke, however, also said the Fed is ready to act
if Europe's crisis deepens.
"Bernanke didn't provide much in terms of details, so
further policy still hinges on economic data," said Mark
McCormick, G-10 currency strategist at Brown Brothers Harriman
in New York.
"The two points Bernanke stressed - the euro zone and the
looming U.S. fiscal cliff - could mean an easing announcement at
its meeting later this month," he said. "I do not foresee
another round of Fed quantitative easing, but perhaps through a
communication channel or an extension of Operation Twist."
Operation Twist involves the Fed exchanging short-term
Treasuries for long-term bonds.
Meanwhile, German Chancellor Angela Merkel said Europe was
ready to act to ensure stability in the euro zone as Spain's
credit rating was cut by three notches amid expectations it may
soon seek EU help for banks beset by bad debts.
The euro was last changing hands at $ 1.2596, up 0.2
percent on the day. The euro earlier peaked at $ 1.2625,
according to Reuters data, its highest level since May 23.
Against the yen, the euro also hit its highest level since
May 23, at 100.61 yen, before paring gains to trade at
100.28 yen, up 0.7 percent.
Before Bernanke began his testimony to Congress, trading had
been influenced by China's twin surprises on interest rates,
cutting borrowing costs to combat faltering growth while giving
banks additional flexibility to set deposit rates.
"Rate cuts in China serve to reduce China's exposure to
global weakness," said Douglas Borthwick, managing director of
Faros Trading in Stamford, Connecticut. "Rate cuts in
combination with a stimulus program - still to be announced,
should shelter Asia somewhat from global weakness and should
help keep a bid to Asian growth and currencies."
Decent demand at a Spanish bond auction and expectations
that European policymakers may take further steps to support the
global economy also buoyed the euro.
The global economy has floundered in recent weeks. Risks to
growth have mounted on concerns about a possible Greek exit from
the euro zone and the fragility of the Spanish banking system,
putting pressure on euro zone politicians and global central
banks to come up with a credible policy response.
Speculation that Spain could become the fourth euro zone
country to need an international bailout prompted investors to
sell the euro heavily last week, although European sources have
said Germany and European Union officials are urgently exploring
ways to support Spain's country's stricken banks.
Many market players were already expecting euro gains to be
limited. A Reuters poll suggested the euro was unlikely to
recoup recent steep losses against the dollar in the next 12
months.
The dollar managed to outperform the yen, which was hit
broadly as risk appetite improved.
The dollar was trading 0.5 percent higher at 79.62 yen
after posting a session peak of 79.78, also the highest
since May 23 using Reuters data.
(Additional reporting by Nick Olivari[1], Editing by G Crosse)
References
- ^ Nick Olivari (blogs.reuters.com)
- ^ Reprints (www.reutersreprints.com)
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