26 January 2001, 12:44 Forex: Dollar weakens vs euro in early London despite U.S. rate cut hopes
LONDON (AFX) - The dollar weakened against the euro in early London
trade despite the consensus market view that the FOMC will cut rates by
50 basis points at next week's meeting, dealers said.
Dealers could find no obvious reason for the dollar's loss of
ground but said the euro has rallied against both the U.S. currency and
sterling after being oversold in recent days.
"People are taking a little bit of heart on the prospects for the
euroland. The euro has broken through the resistance level of 0.9270
and if it can hold above that level, we should see it continue to
firm," Halifax economist Steven Pearson said.
He said investors were initially disappointed when Federal Reserve
Chairman Alan Greenspan failed to mention interest rates in his
testimony to the U.S. senate but they took his warning of zero growth
in the U.S. economy as a signal of a 50-point rate cut.
Deutsche Bank's Paul Meggyesi agreed, revising his prediction from
an earlier 25-point cut.
"Respected Fed-watcher John Berry of the Washington Post has also
gone to press claiming that Greenspan will press for a 50 basis point
cut, albeit without citing any Fed sources," Meggyesi said in a
research note.
Dealers said investors will watch today's U.S. durable goods orders
data for December for further clues on the likely size of the expected
rate cut.
The yen remained under pressure after the Bank of Japan appeared to
change its earlier view that the currency was too weak. The BoJ
governor said in comments overnight that "if the yen does go to far to
one side, that's not good (for the economy)."
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