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FOREX-Dollar rises broadly, hits 11-month high versus yen
March 14, 2012 / 9:28 AM / 6 years ago

FOREX-Dollar rises broadly, hits 11-month high versus yen

* Dollar extends gains on upbeat U.S. data, FOMC
    * Higher Treasury yields also shoring up greenback
    * EUR/USD at 1-mth low as stop losses triggered

    By Neal Armstrong	
    LONDON, March 14 (Reuters) - The dollar hit an
11-month high against the yen and 1-month high versus the euro
on Wednesday, with more gains foreseen after a modest upgrade of
the Federal Reserve's economic forecasts and firmer U.S. data
lessened the greenback's status as a funding currency.	
    U.S. 2-year Treasury yields hit a 7-1/2-month high after
solid retail sales data, making the dollar less attractive to
fund investments in higher-yielding assets. Tokyo exporters were
also reluctant to sell it now, expecting more strength, traders
said.	
    These factors saw the dollar hit a high of 83.41 yen 
in European trade, its highest level since mid-April to trade up
around 0.7 percent for the day. Traders said key resistance was
last year's high of 85.53 yen.  	
    Recent easing steps by the Bank of Japan and the country's
trading deficit amid surging demand for fossil fuels in the wake
of the nuclear crisis have also helped the dollar, which has 
risen 9 percent to the yen since the beginning of February.	
    "We have revised our dollar/yen forecast up to 90 in six
months and think it will stay there until twelve months from
now," said Raghav Subbarao, currency strategist at Barclays
Capital.	
    Barclays' previous forecasts were for dollar/yen to be at 82
in six months and 84 in a year.	
    The U.S. unit gained also against all other currencies, with
its index hitting its highest in nearly eight weeks of 80.435
.  	
    Hot on the heels of Friday's encouraging U.S. jobs report, a
strong 1.1 percent rise in retail sales provided fresh evidence
of an upturn in the world's largest economy.  	
    Acknowledging this trend, the Fed slightly upgraded its
outlook, expecting "moderate" growth over coming quarters and a
gradual decline in the unemployment rate, although it said the
jobless rate remained elevated. 	
    "The arguments in favour of a switch in funding currency
from the USD to the EUR and JPY continue to build, and some such
shift appears to be taking place, even if it is gradual and only
at the margins driven by additional risk-taking," said BNP
Paribas in a note.	
     	
     	
    THE 'INVERSE RELATIONSHIP'  	
    Further boosting sentiment, the Fed's annual stress tests 
showed the majority of the largest U.S. banks passed, bolstering
strong gains on most stock exchanges.  	
    The traditional inverse relationship between the dollar and
equity markets has all but broken down and analysts expect this
can persist.  	
    "A part of the explanation is the very low starting point of
expectations in early 2012 for U.S. growth and forward rates,"
said Jens Nordvig, global head of foreign exchange strategy at
Nomura Securities.  	
    "Another part of the explanation is that the ECB's LTRO
(long-term funding) operations have changed EUR/USD trading
dynamics. In a way, the euro is the new dollar, with potential
to become the favorite funding currency in global capital
markets," he said.  	
    The euro fell to a one-month low of $1.30308 on EBS,
triggering stop losses below support at $1.3054, the 50 percent
retracement of a Jan 16-Feb 24 rally. It later recovered a touch
to $1.3052, down 0.2 percent for the day.	
    Euro zone industrial production for January and inflation
data for February were due for release at 1000 GMT.      	
    Further support for the euro looms at the next major trough
on daily charts at the Feb. 16 low of $1.2974, and the 61.8
percent retracement of the January to February rally at $1.2954.
 	
    The Australian dollar also fell against its U.S.
counterpart. It was down 0.5 percent at $1.0500,
inching closer to a seven-week trough of $1.0473 plumbed on
Monday.

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