Forex rebates on every trade - win or lose!

LONDON(AFX) - The dollar held on to its recent gains in early trade, with euro-usd settling under the 1.24 level after the European Central Bank cranked up the volume on the euro's strength, analysts said.

'A near constant barrage of verbal intervention by European officials last week combined with healthy US economic as well as net flow data gave new life to the dollar,' Frank Gong, strategist at Bank of America said.

The latest assault came from Austrian central bank governor, Klaus Liebscher, who called on the US to live up to its strong dollar policy.

'I welcome US Finance Minister John Snow's occasional statements that he is

interested in a strong dollar. I hope that this commitment is credible,'

Liebscher said in an interview.

ECB president Jean-Claude Trichet, chief economist Otmar Issing and Bank of France head Christian Noyer have all voiced concern over the damaging effects of a rapidly rising euro.

But with US markets closed today to mark Martin Luther King day, volumes are expected to be limited. Tomorrow, attention will focus on the US earnings season and US president George Bush's State of the Union address.

Dresdber Kleinwort Wasserstein analysts pointed out that there is also a

good deal of 'political event risk ' within the euro zone this week.

The euro group meeting today, the EU Finance Ministers meeting and ECB governing council member Otmar Issing's testimony before the European

parliament tomorrow and the World Economic Forum in Davos starting on Wednesday; may all provide direction for the currency market, they said.

'The ZEW survey out of Germany -admittedly not usually a forex market mover - is likely to meet with particular interest this month, as it could provide one of the first pieces of survey evidence that the euro-rise is having

adverse effects,' they said.

West LB analysts expect the dollar to stabilise after last week's gains.

'Negative dollar sentiment is likely to return although market participants will be more cautious in selling,' they said.

The US current account deficit is still a worry despite Friday's capital flow data which revealed foreign buying worth 82.5 bln usd in November.

While this data is strong, it does not compensate for weak inflows in the previous two months, West LB analysts said.

Players sold the euro in the past week due to the very one-sided positioning but the overall sentiment has not changed, they said.

The yen was weaker against the dollar but with no convincing indication that the Japanese authorities have been intervening to weaken the yen.

Kamal Sharma, strategist at Commerzbank, said several stops were triggered amid the dollar's broader weakness.

Sterling drifted lower amid speculation that UK inflation rates will trend lower, making it difficult for the Bank of England to justify a widely expected rate hike in February.





London 9.26 am Singapore 2.30 pm



Dollar



yen 107.36 up from 106.57

sfr 1.2696 up from 1.2666



Euro



usd 1.2372 down from 1.2385

stg 0.6900 up from 0.6889

yen 132.75 up from 131.96

sfr 1.5696 up from 1.5684



Sterling



usd 1.7926 down from 1.7983

yen 192.05 up from 191.55

sfr 2.2737 down from 2.2764



Australian dollar



usd 0.7560 down from 0.7590

stg 0.4230 up from 0.4219

yen 81.16 up from 80.88

Eurogroup to Fix on Currency Rhetoric
Mon January 19, 2004 04:26 AM ET

By Swaha Pattanaik
BRUSSELS (Reuters) - Euro zone finance ministers are likely to join forces Monday to signal they don't want any more speedy gains in their common currency at an informal Eurogroup gathering in Brussels.

Before they met, political and monetary leaders stressed the main worry lay not so much with the euro's present exchange rate as with the speed it has risen, and the possibility that any further gains would hurt European economies.

The ministers' session, due to start at 1800 GMT, is the last before the February 6-7 meeting of the Group of Seven finance ministers and an ideal opportunity to come up with a coordinated line on what many of them have said individually.

There is no guarantee of a formal statement but EU finance sources said ministers may want to clarify their past mantra that a strong and stable euro is in the bloc's interests, without ditching that formula altogether.

Belgian Prime Minister Guy Verhofstadt signaled any continuation of the euro's 20 percent rise in the past year against the dollar would be unwelcome.

"For the moment there is not really a problem," he told Belgian radio. "But it is clear that if the tendency continues, that is going to create problems, problems for all the EU countries, especially for those countries like Belgium which have an open economy."

Austrian Central Bank Governor Klaus Liebscher underlined monetary policymakers' traditional dislike of rapid changes in exchange rates, which they regard as disorderly and make life tough for importers and exporters.

"I am worried about the euro rise, but only about the speed of appreciation. That is unhealthy," he told the Financial Times Deutschland newspaper in an interview published on Monday.

But Liebscher, who sits on the European Central Bank's interest rate-setting Governing Council, said the euro's climb should not be dramatised. "The rise will be balanced by global growth. It also has positive aspects" in that it serves to dampen inflation, he noted..

The euro has recently retreated from record highs just below $1.29 but the ministers might nevertheless want to tinker with the "strong and stable" axiom as financial markets have come to take the statement as a green light to buy euros.

Added nuances that stress the finance ministers' objections to big exchange rate swings can be expected to win backing from the ECB, which will be represented at the meeting.

"I think there will be something after the meeting as there is growing concern and the markets expect them to say something," said one EU finance official.
"The message should be clarified -- while the level of the euro isn't the major problem right now, at some point it will have the potential to get out of hand. Speed is the issue."

Any such clarification will attract far more financial market attention than budget discussions, including the European Commission's decision to go to court to challenge the suspension of EU budget rules by finance ministers last year.

DELICATE WORK AHEAD

Euro zone finance ministers' deputies discussed the euro's exchange rate at meetings this week that prepared the ground for Monday's informal euro zone meeting and Tuesday's wider EU finance ministers' meeting, EU sources said.

They did not come up with any new wording on exchange rates, leaving it to the Eurogroup of euro zone ministers to decide how they wanted to deal with the issue.

Public declarations so far have made it clear that many euro governments are reaching the limits of their tolerance.

German Chancellor Gerhard Schroeder and French President Jacques Chirac were among the European politicians to express concern last week about the euro's rapid rise against the dollar and exchange rate volatility.

A stronger euro erodes export competitiveness and is therefore a highly politically sensitive issue at a time when the euro zone economy is only just getting off the ground.

Looks like it's time to long the GBP/ and EUR/USD crosses again this morning.

edit. Caution because they're a bit overbought and may be due a pullback first.

Jolly hockeysticks. They're both racing up now.

:o))

who's a clever girl then - even got the little pullback
i was waiting for 178.00 - greedy i know

You're a star Beeble.

:o)

That could be it for the moment, Beeble. I'll leave something there for the next person and come back to it later.

:o)

running out of steam a little now,
do tell when any of the following occur;
1. you reverse
2. you change into trousers
3. you put your tennis gear on

i'm expecting tonights state of union to be good for $, so this current rise might get a knock on the head. b of e minutes may give us a clue to next months
rise or not debate.

sorry hilary, crossed posts

Beeb,

Funnily enough I'm expecting the opposite from Dubbya's address. I think that he'll announce fiscal spending in election year which will be bad for the dollar. I suspect that the GBP and EUR will both pullback this afternoon in anticipation of his speech and then move up again tonight.

The EUR has definitely been the poor relation to the GBP both long and short these last few days. All the price action has been on the GBP/USD cross.

Beeble,

Do you fancy a knockabout then?

yes, i'm currently looking for a woman to play around with,
round of golf that is !
used to play a lot of tennis and squash - back problem limits me to fairways now, but i couldnt resist an offer like this so,
i'll try tennis in the morning, as long as you try golf in the afternoon,
p.s. i'm really good in the bushes

sorry to keep asking dim questions!

I now have a CMC account (& sub - account)

What is the difference between a 31 March 2004 (M) and a 31 MArch 2004 (Q)

?????

This is GBP to USD

No idea, Sue, as I don't use CMC. The March IMM contracts are $6.25 BPH4 and they expire on 15/4/03.

tried a small short on the cable @181.69, but got stopped out
@182.03 - of course it immediately came back down
todays rise is 3.5 cents - unbelievable

It's in vertical mode now, Beeble. When I entered the positions, it was my intention to pyramid them and instead I came out. Muppet.

I'm happy with my lot for the day, but I'll just have to be patient and wait for an entry to get back in now I suppose. Hohumm.

me too - dont think we'll see 178.30 again for a while though,
and tiddly dee !

Sue. I think I've solved it. If you ask for a price on the (M) bet it shows N/A, which you would expect as I wouldn't have thought it would be available until March 1. But the Mar (Q) bet does show a price.

maggot thanks

Do you have a view on dclinton's post about arbitrage?

maggot - I get a price for all the bets in sort of light grey. I think I'll ring & ask.