Monday, August 29, 2011


Posted by Muhammad Ashraf at 7:40 AM
Euro holds steady above $1.45, as Bernanke boosts sentiment
--Positive tone weighs on safe-haven Swiss Franc
--Bank of Israel to hold interest rate decision later Monday
By Jessica Mead 
LONDON (Dow Jones)--The euro and other risk-sensitive currencies such as the Australian dollar remained supported Monday after Federal Reserve chairman Ben Bernanke's speech boosted overall market sentiment, despite the fact he didn't announce any imminent monetary stimulus for the U.S. economy.
However, with London--the world's largest foreign-exchange hub--out for a national holiday, activity was subdued.
In a otherwise dull trading session, the euro held steady above the $1.45 level against the dollar despite comments by International Monetary Fund Managing Director Christine Lagarde, who warned that some European banks need to be recapitalized. The single currency continues to ignore ongoing uncertainty surrounding the second bailout for troubled Greece, as market participants instead remain fixated on developments in the U.S.
"The currency's strength suggests that once again markets are ignoring systemic risk and focusing on prospects of further quantitative easing measures from the Federal Reserve and trading on the basis of risk-appetite correlations," said Ilan Solot, a currency strategist at Brown Brothers Harriman in London.
Elsewhere, the Swiss franc fell to its weakest level against both the euro and the dollar in more than a month as the more positive tone encouraged traders to pull out of the safe-haven currency. The euro climbed to as high as CHF1.1865 against the franc while the greenback traded up at CHF0.8161.
But the other traditional safe-haven currency, the yen, traded sideways against the dollar at around Y76.65 despite further steps announced by the Japanese government to help exporters and small firms that are suffering from the super-strong yen. The yen was also not affected by Finance Minister Yoshihiko Noda's success in the ruling Democratic Party of Japan's leadership contest.
In emerging markets, attention turns to Israel, where the country's central bank will deliver its interest rate decision later Monday. The bank is widely expected to keep interest rates unchanged at 3.25%, while acknowledging strains in the global economy.
"The Bank of Israel will remain on hold for now, monitoring the data closely while saving potential rate cuts to respond to further deterioration, both globally and domestically," said emerging market strategists at Goldman Sachs in a note to clients.
Looking ahead, data-wise U.S. personal income and spending are due for release at 1230 GMT and pending home sales are at 1400 GMT. In addition, the European Central Bank's president Jean-Claude Trichet takes questions at 1300 GMT from the European Parliament's economic committee in the first of a two-part hearing on key issues facing the euro zone.
At 1031 GMT, the euro was trading at $1.45107 against the dollar, compared with $1.4498 late Friday in New York, according to trading system EBS. The dollar was at Y76.605 against the yen, compared with Y76.74, while the euro was at Y111.15 compared with Y111.13. Meanwhile, the pound was trading at $1.6384 against the dollar, compared with $1.6371 late Friday in New York.
The ICE Dollar Index, which tracks the greenback against a basket of currencies, was at 73.656 compared with 73.713 late Friday in New York.
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