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FOREX-US dollar rises to more than 6-week high vs yen

Published 12/21/2009, 12:42 PM
Updated 12/21/2009, 12:45 PM
EUR/CHF
-

* Year-end flows, Fed expectations lift greenback

* Fiscal worries about Greece weigh on euro

* Euro recovers from earlier 9-month low vs Swiss franc

* SNB intervention jitters remain (Updates prices, adds comment, details)

By Wanfeng Zhou

NEW YORK, Dec 21 (Reuters) - The dollar rose to a more than six-week high versus the yen on Monday as expectations the U.S. economy is reviving encouraged investors to bet the Federal Reserve will raise interest rates sooner rather than later.

The euro stayed near its weakest level in more than three months against the dollar, pressured by lingering concerns about the fiscal health of Greece.

Solid figures on the U.S. job market and retail sales earlier this month have prompted talk the U.S. economy may recover sooner than the euro zone and Japan, helping the dollar maintain its upside momentum.

"We have a lot of traders who want to book profits this week before the end of the year," said Greg Salvaggio, senior vice president of capital markets at Tempus Consulting in Washington.

"There's also a belief that the U.S. economy is recovering at ... a much more rapid pace than many people have previously thought," he added. "As a result, traders are a little bit anxious about the possibility of a shift in the Fed's interest rate policy next year."

The Fed reiterated earlier this month interest rates will remain low for "an extended period." Charles Evans, president of the Chicago Federal Reserve Bank, said on Monday that to him "extended period" means about three to four meetings.

In an interview with business television channel CNBC, he also said low inflation will give the central bank room to keep monetary policy easy for an extended period [ID:nN21406408]

Most U.S. primary government securities dealers expect the Fed to hike rates by the end of the first quarter of 2011, with only the most optimistic seeing an increase during the second quarter of 2010, according to a Reuters poll. See [ID:nNYS007624].

The dollar climbed as high as 91.01 yen , according to Reuters data, the highest level since early November. It last traded at 90.93 yen, up 0.7 percent on the day.

The euro fell 0.2 percent to $1.4318 , close to Friday's low of $1.4262 set on electronic trading platform EBS, its weakest since Sept. 4.

The euro has fallen sharply from levels above $1.50 as recently as Dec. 4, pressured by concerns about the fiscal health of some countries on the euro zone periphery following recent rating agency downgrades on Greek debt.

There is no risk of a euro-zone country defaulting on its debt, European Central Bank Governing Council member Athanasios Orphanides was quoted on Monday as saying. See [ID:nLDE5BK1IH].

FRANC RETREATS

Meanwhile, the euro recovered most losses against the Swiss franc after tumbling to a nine-month low overnight when traders took advantage of thin liquidity to push it quickly through stops below 1.49 Swiss francs.

The euro was last down 0.1 percent at 1.4937 francs . It had earlier crashed through stops below 1.4900 francs to hit a nine-month low of 1.4826 on EBS.

Investors have been testing the resolve of the Swiss National Bank after it subtly altered its intervention stance earlier this month, saying it would act only to counter an "excessive" appreciation of the franc versus the euro.

But investors continued to worry about the chances of intervention. In earlier trade, the franc fell sharply against the dollar and the euro, with traders saying a large dollar/Swiss franc buy order by a commercial bank triggered unconfirmed talk of SNB action.

The SNB and Bank for International Settlements, which has acted for the SNB in the past, declined comment.

"Euro/Swiss has reached quite low levels and it could be an indication that the SNB is not targeting specific levels as such," said Sverre Holbek, Danske Bank strategist in Copenhagen.

"This may allow the currency to slip a bit further than we've seen previously, but we still don't think they are ready to abandon their intervention in the currency market just yet."

(Editing by Andrew Hay)

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