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FOREX-Dollar up as euro pressured by ECB, fiscal jitters

Published 03/29/2009, 09:23 PM
Updated 03/29/2009, 09:48 PM

* Dollar pushes higher after euro plunge on Friday

* ECB, G20 in focus this week for steps to boost economies

* Japan industrial output slides 9.4 percent in Feb

TOKYO, March 30 (Reuters) - The dollar pushed higher against other major currencies on Monday, propelled by the euro's losses sparked by a policymaker suggesting fiscal irresponsibility in the region could put the single currency at risk.

The European Central Bank (ECB) meets this week and as well as expecting an interest rate cut the market is waiting to see how far it might follow other central banks in taking unconventional steps to shore up the economy.

The euro posted its biggest one-day fall against the dollar in two months on Friday after Germany's finance minister said it could one day face trouble in terms of stability and credibility if the euro zone's fiscal responsibility pact was not taken seriously.

Spain will make its first bank bailout of the financial crisis, saying at the weekend its central bank would pump money into a regional savings bank which joins a list of banks on both sides of the Atlantic that have needed rescuing.

"All these factors are weighing heavily on the euro and that's just dragging the dollar higher right across the board," said Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney.

The ECB holds a rate review on Thursday and as well as expectations that it will cut its main policy rate by half a percentage point to a new record low of 1 percent, policymakers have shown signs of warming to the idea of buying private debt.

ECB President Jean-Claude Trichet attends a European Parliament committee hearing at 1430 GMT on Monday and the market will be listening for clues on its next steps.

"The market will be on high alert for any comments that the ECB may be moving further into the realm of unorthodox monetary policy," Trinh said.

The euro slipped 0.3 percent to $1.3256 after shedding more than 1.5 percent on Friday as weaker-than-expected euro zone industrial orders and German inflation data fanned concerns.

High yielders the Australian and New Zealand dollars also fell against the greenback as investors grew more conservative ahead of a series of potentially market-moving events this week.

Leaders of the Group of 20 developed and developing nations meet on April 2 and the market will be watching to see what measures they will discuss to fight the global economic crisis.

In Japan, industrial output fell 9.4 percent in February from the month before as weak global demand weighed on an economy mired in a deepening recession.

But manufacturers said they expect output to rise by about 3 percent in March and April, suggesting it may bottom out after sharp declines since late last year.

The euro was flat at 130.18 yen after dropping more than 2.5 percent in the previous session.

The dollar was 0.3 percent higher at 98.23 yen, after falling nearly 1 percent on Friday, but was still within sight of this month's four-month high at 99.69 yen. (Reporting by Charlotte Cooper; Editing by Michael Watson)

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