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FOREX-Dollar broadly weak, euro nears 14-mth high

Published 10/19/2009, 04:50 AM
Updated 10/19/2009, 04:54 AM
EUR/USD
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* Dollar struggles broadly, approaches 14-mth low vs euro

* Analysts say dollar weakness trend remains intact

* Market awaits EZ ministers' meet for possible FX comments

(Releads, adds comment, updates throughout; previous TOKYO)

By Naomi Tajitsu

LONDON, Oct 19 (Reuters) - The dollar slipped broadly on Monday, approaching a 14-month low against the euro as the U.S. currency remained under selling pressure on expectations U.S. interest rates will stay low for months to come.

The euro dangled just below the psychologically key $1.50 level before a euro zone finance ministers' meeting later in the day, which market participants will watch for any comments on strength in the single currency.

Ongoing concerns that the U.S Federal Reserve will keep rates pinned near zero until well into 2010 and the possibility the dollar will gradually lose its top reserve currency status has contributed to broad dollar weakness, boosting the euro.

"The trend clearly is for a weaker dollar due to a lack of interest rate support for the U.S. currency, the U.S. budget deficit and of reserve bank diversification flows into other currencies, like the euro," said Marcus Hettinger, global currency strategist at Credit Suisse in Zurich.

Markets awaited more third-quarter earnings results from U.S. firms later in the day, including bellwethers Apple Inc and Texas Instruments.

The dollar recovered slightly on Friday after a large quarterly loss at Bank of America helped to dull investor demand for higher-yielding currencies, which have benefited this year as investor confidence has picked up.

By 0818 GMT, the euro traded 0.2 percent higher at $1.4925, having touched the day's high of $1.4946 in early European trade. Late last week, the single currency rose to $1.4967, its strongest since August 2008.

Against a currency basket, the dollar was 0.1 percent lower at 75.499, while the U.S. currency slipped 0.4 percent against the yen to 90.50 yen.

On a trade-weighed basis, the euro jumped to 118.82 on Friday, close to historic highs.

STRONG EURO COMMENTS?

Market participants were on the lookout for possible remarks on euro strength and dollar weakness at a gathering of euro zone finance ministers and European Central Bank officials in Luxembourg later in the day.

The euro has appreciated nearly 7 percent against the dollar so far this year.

Eurogroup Chairman Jean-Claude Juncker said on Friday a continued euro rise may slow Europe's economic recovery, but ECB President Jean-Claude Trichet has repeatedly supported Washington's stance in favour of a strong dollar.

Given such statements, some analysts said officials were unlikely to significantly talk down the euro at the meeting.

"Euro area finance ministers meet today and may talk down EUR/USD, but as the decision is ultimately the ECB's (which eschews this tactic), any down move in the currency should be brief and shallow." JPMorgan analysts wrote in a note.

The Australian dollar rose 0.5 percent to $0.9210, nearing a 14-month peak of $0.9271 hit late last week.

The Aussie was supported after a senior official from the Reserve Bank of Australia said it was entirely appropriate to return to more normal monetary policy settings. The RBA raised rates to 3.25 percent earlier this month.

(Editing by Nigel Stephenson)

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