✂ Fed’s first rate cut since 2020: Use our free Stock Screener to find new opportunities fastExplore for FREE

FOREX-Euro up, tests $1.30 after German data beats forecast

Published 03/17/2009, 08:08 AM
Updated 03/17/2009, 08:16 AM

* Better than expected German ZEW index extends euro gains

* Dollar, yen weaken as risk sentiment improves tentatively

* BoJ to buy up to $10.2 bln subordinated loans from banks

* Nervousness ahead of FOMC, BoJ meetings Wednesday

(Recasts, adds quotes, changes bylines)

By Jessica Mortimer

LONDON, March 17 (Reuters) - The euro firmed versus the dollar on Tuesday, testing $1.30 on the back of better than expected results from Germany's ZEW survey of sentiment towards the euro zone's biggest economy.

A broad improvement in risk sentiment weighed on the dollar and the yen -- lending further strength to the single currency.

Traders were wary, however, ahead of U.S. and Japanese central bank policy-setting meetings which both end on Wednesday.

German analyst and investor sentiment unexpectedly rose in March to its highest level in about a year and a half, with the ZEW economic expectations index rising to -3.5 from -5.8 in February, well above forecasts for a fall to -7.4.

The economic think tank also said that, although the economic situation was extremely bad, there were signs of hope and that the bottom of the recession was likely to be reached this summer.

The euro extended earlier moderate gains after the news, briefly taking it back above the $1.30 level against the dollar.

by 1126 GMT, the euro was up 0.2 percent at $1.2994, while the dollar index was slightly lower at 86.957.

"The ZEW is slightly better then expected, this certainly has helped the euro, especially as there had been a fair amount of rumours beforehand that it was going to be a poor number," Bank of New York Mellon analyst Simon Derrick said.

"Once again we ride back again above $1.30 and it feels as the euro is gaining strength," he said.

The Bank of Japan also boosted sentiment by saying it would buy up to $10.2 billion in subordinated loans issued by banks to bolster their depleted capital.

BOJ governor Masaaki Shirakawa said in a subsequent press conference that the programme was aimed at banks facing big risks from falling stock prices..

Against the yen, the dollar rose 0.5 percent to 98.66 yen while the euro gained 0.7 percent to 128.22 yen.

The Bank of Japan is seen keeping interest rates unchanged at 0.10 percent on Wednesday but could increase its outright buying of government bonds.

The policy-setting Federal Open Market Committee panel also kicks off its meeting later on Tuesday. With rates already near zero, the focus is on whether the U.S. central bank will expand its balance sheet further.

There is speculation that the Fed may decide to purchase long-dated Treasuries, but some say those hoping for such an outcome may be disappointed.

"The outcome of the March 17-18 meeting of the Federal Open Market Committee (FOMC) is apt to be identical to that of the January 27-28 meeting," Goldman Sach said in a note to clients.

"While we see several reasons why Treasury purchases make even more sense now than they did then, the FOMC appears disinclined to take this step yet."

(Reporting by Jessica Mortimer; editing by Patrick Graham)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.