Sunday 28 June 2009

CORRECT:WORLD FOREX: Rising Risk Appetite Pushes Dollar Lower

By Nicholas Hastings


LONDON (Dow Jones)--Risk appetite is on the way up again, pushing the dollar lower and the euro higher in Europe Friday.

The improved sentiment emerges at the end of a week in which the U.S. Federal Reserve appeared to have preserved its rather dovish view of the global economy and the European Central Bank poured fresh liquidity into the euro-zone economy through massive one-year loans to the banking system.

This along with some relatively positive economic news over the course of the week has convinced investors that central banks will continue to encourage the recovery and aren't likely to tighten monetary policy again anytime soon.

The need for further monetary accommodation was driven home earlier Friday by news from Japan that its consumer price index had fallen by 1.1% over the last year, the largest decline in the index since it was introduced 38 years ago.

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Nevertheless, optimism was feeding through in to equities with a strong 2.1% rally in the Dow Jones Industrial Average being followed by a 0.8% rise in the Nikkei in Japan and gains of as much as 0.8% on European bourses.

The crude oil market also reflected the better mood, with the price of the August contract on the New York Mercantile Exchange gaining 75 cents from Thursday's close to trade at $70.98 a barrel.

The Swiss franc, which had come under two unconfirmed intervention attacks Thursday, was trading flat against the euro with market participants nervous that the Swiss National Bank will launch another exercise to drive the franc lower. Thursday's intervention, which is believed to have been carried out through the Bank for International Settlements, helped to lift the euro from close to CHF1.50.

Around 0930 GMT, the euro was still up at CHF1.5313, hardly changed from CHF1.5315 late Thursday in New York, according to EBS.

The dollar, however, fell to CHF1.0916 from CHF1.0947 as the U.S. currency suffered from the rise in risk appetite.

Elsewhere, the euro rose to $1.4026 from $1.3988 and to Y134.50 from Y134.01, while the dollar was nearly flat at Y95.89 compared with Y95.86.

The pound rose to $1.6461 from $1.6373.

In Eastern Europe, currencies were mixed. The euro was up a little at HUF276.23 from HUF276.18. However, it was also down at PLN4.5027 from PLN4.5034 and at CZK25.970 from CZK25.994.

-By Nicholas Hastings, Dow Jones Newswires; 44 20 7842 9493;

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