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FOREX-Dollar falls broadly on rates view; euro eyes $1.50

Published 10/15/2009, 04:40 AM
Updated 10/15/2009, 04:45 AM
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* Dollar falls to 14-month low vs euro, forex basket, Aussie

* Dollar hits 15-month lows vs Canada, NZ, Swiss franc

* Aussie boosted by RBA Stevens' hawkish comments

* Dovish FOMC minutes weigh on dollar

(changes dateline, byline, writes through, previous TOKYO)

By Tamawa Desai

LONDON, Oct 15 (Reuters) - The dollar fell to multi-month lows against the euro and commodity-based currencies as policymaker comments reinforced expectations U.S. interest rates would stay lower for longer than those of other major countries.

The greenback hit 14-month lows against the euro and the higher-yielding Australian dollar and a 15-month trough versus the New Zealand and Canada dollars.

It also touched a three-week low against sterling after a Bank of England policymaker said its quantitative easing programme was working.

Expectations U.S. interest rates would remain low for some time were reinforced by minutes from the latest meeting of the U.S. Federal Reserve's policy-setting committee and gave traders a green light to sell the dollar.

Meanwhile risk sentiment was buoyed by forecast-beating earnings from JPMorgan and Intel Corp this week, boosting equities and dimming the dollar's appeal.

More earnings are due out on Thursday, with traders focusing on Goldman Sachs and Citigroup.

European share prices opened higher after gains in Asia and on Wall Street.

"Firmer equity markets and lower risk aversion continue to depress the dollar," said Adam Cole, global head of FX strategy at RBC Capital Markets.

The euro hit a 14-month high of $1.4967, according to Reuters data, with technical analysts eyeing a break above $1.5, but some cited caution. At 0738 GMT, it was up 0.1 percent at $1.4940.

Sources close to the Eurogroup of euro zone finance ministers said on Wednesday they would discuss exchange rates at meeting on Monday, with concern more likely about the possibility of the euro's further rise than about current levels.

European Central Bank President Jean-Claude Trichet speaks at a conference later in the day, and "forex markets obviously (are) attuned to any mention of euro strength as a cause for concern," RBC's Cole said.

Some traders said the euro's strength was aided by emerging economies' central banks seeking to diversify their foreign reserves. The banks have been buying dollars to prevent their own currencies from rising sharply but some are selling the greenback in favour of the euro, the traders said.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.2 percent at 75.332 after falling to a 14-month low of 75.211.

The dollar was under pressure after minutes of the latest Federal Open Market Committee meeting showed some policymakers called for increasing asset purchases, underscoring views the Fed would not be raising rates any time soon.

"The dollar was hit by surprisingly dovish FOMC minutes," UBS analysts said in a note. "The minutes clearly indicate the FOMC is a long way from tightening and balance sheet reduction does not appear to be a policy priority either."

That was in sharp contrast to comments by Reserve Bank of Australia chief Glenn Stevens, who said local interest rates would need to move towards a more normal setting as economic recovery took hold, reinforcing the view rates would be hiked for a second consecutive month in November.

The Aussie rose as high as $0.9228 on the Reuters dealing system, its highest since August 2008, before trading at $0.9209 , up 0.6 percent from late New York trade.

The kiwi touched a 15-month high of $0.7487, after stronger-than-expected inflation numbers raised expectations of a near-term interest rate hike.

The Canadian dollar, another currency linked to commodities, hit a 15-month high against the dollar of C$1.0207.

The dollar's broad fall also extended to the Swiss franc, which hit a 15-month peak of 1.0117 franc, while sterling hit a three-week high against the dollar.

Bank of England policymaker Paul Fisher told the Financial Times he felt more confident the central bank's asset purchase programme was "having the scale and speed of impact that we would have hoped for when we started (in March)".

U.S. consumer prices and jobless claims data will be watched for any further signs of recovery.

The dollar held steady against the yen above 89 yen. Japanese Finance Minister Hirohisa Fujii repeated that countries must not compete in devaluing their currencies.

(Additional reporting by Satomi Noguchi in Tokyo, editing by Nigel Stephenson)

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