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FOREX-Dollar pressured on rising speculation of US easing
July 16, 2012 / 8:14 PM / 5 years ago

FOREX-Dollar pressured on rising speculation of US easing

* Poor U.S. retail sales weigh on dollar
    * Investors nervous ahead of Bernanke testimony


    NEW YORK, July 16 (Reuters) - The dollar fell to a one-month
low against the yen o n Monday after poor June U.S. retail sales
data bolstered speculation the Federal Reserve may launch
another round of quantitative easing to boost a slowing economy.
    The euro was also on the defensive against most currencies,
hitting a 3-1/2-year low against sterling and a six-week trough 
versus the yen as investors fretted about the delay in
mobilizing bailout funds for troubled euro zone states. 
    The  common currency did reverse early losses against the
dollar in the aftermath of the weak U.S. retail sales number,
but investors cautioned it was not the start of a strong
uptrend.
    Instead, investors have temporarily shifted their focus to
the U.S. economy from euro zone debt concerns after Monday's
weak U.S. numbers and ahead of testimony by Fed Chairman Ben
Bernanke on monetary policy this week.
    U.S. retail sales fell 0.5 percent last month, though
economists had expected a gain of 0.2 percent. Ex-autos, sales
dropped 0.4 percent. 
    "I think people have started to re-price more easing coming
through from the Fed after the retail sales data," said Brian
Kim, currency strategist at RBS Securities in Stamford,
Connecticut.
    In the absence of any other negative news from the euro
zone, Kim added that market participants used negative U.S. news
as an excuse to pare back hefty short positions on the euro. 
    "We have moved quite a bit lower on the euro and there's a
bit of fatigue setting in terms of the euro downside. But
overall, the euro still has a negative bias and it is still a
sell on rallies."
    In late afternoon New York trading, the dollar slid 0.4
percent against the yen to 78.82 yen, adding to losses
after the soft U.S. retail sales data. The greenback fell as low
as 78.67 yen, its weakest level since mid-June.
    Investors could sell the dollar more if Bernanke hints in
testimony to Congress on Tuesday and Wednesday at the
possibility of more quantitative easing to boost the U.S.
economy. 
    The Fed last month expanded efforts to keep long-term
interest rates low by saying it would buy an additional $267
billion in long-dated bonds while selling short-term securities.
But it held off from a third round of outright bond purchases. 
    Hedge fund manager Stephen Jen at SLJ Macro Partners in
London said he does not believe U.S. economic numbers are weak
enough to justify further quantitative easing from the Fed.    
But he added that "the Fed could try to convey their easing bias
by extending their commitment of low rates until mid-2015."
    In late afternoon New York trade, the euro rose 0.2
percent against the dollar to $1.2277, with a peak of $1.2290.
It earlier fell as low as $1.2173, not far from a two-year low
hit last week.
    The euro also slid against sterling, to its lowest
since late 2008, but was last at 78.50 pence, down 0.1 percent.
The euro also dropped to 96.14 yen, its lowest since
June 1, but last traded at 96.79 yen, down 0.2 percent.
    The single currency hit a record low against the Canadian
dollar.
    "The euro's losses were mainly a result of the uncertainty
surrounding the (euro zone) bailout fund due to court issues.
The implementation of that fund just keeps getting pushed back,"
said Greg Moore, currency strategist at TD Securities in
Toronto.
    Germany's Constitutional Court said on Monday it would not
rule until Sept. 12 on whether the euro zone's bailout fund --
the European Stability Mechanism -- and planned changes to the
region's budget rules are compatible with German
law. 
    A report suggesting a change in the European Central Bank's
stance on how some bondholders could be treated under Spain's
bank bailout added to pressure on the common currency.
    Investors have stepped up sales of the euro, disheartened by
a lack of progress toward solving the bloc's spiraling fiscal
crisis.
    A report in the Wall Street Journal said ECB President Mario
Draghi advocated imposing losses on holders of senior bonds
issued by the worst-hit Spanish savings banks.
    The ECB declined to comment on the report, which said
finance ministers rejected the advice due to concerns financial
markets would react badly to such a decision.

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