16 January 2004, 16:45  Dollar picks up versus euro, stocks climb

LONDON, Jan 16 - The dollar recovered more ground against the euro on Friday but hit three-year lows versus the yen before suspected intervention by Japan, while European stocks rose to 16-month highs helped by strong U.S. earnings. Bond yields fell after European Central Bank chief economist, Otmar Issing, become the latest official to fret about the euro's recent rise against the greenback, prompting speculation the ECB would cut interest rates. Wall Street stocks looked set for a strong opening while oil traded higher and gold was flat eyeing U.S. industrial production data and the consumer confidence data due later in the day. Worries over the recent slide in the dollar grabbed the spotlight again on Friday as euro zone officials signalled their concern over the euro's 20-percent rise against the greenback over the past year. "This a really significant change. We are starting to hear from the ECB. Its officials are getting extremely vocal," said Ian Stannard, currency strategist at BNP Paribas in London.
ECB council member Guy Quaden added his voice to earlier comments by Issing saying a further rise in the euro on foreign exchange markets was not desirable. The sell off in the euro, however, helped push the dollar to a three-year low against the yen, leading to suspected intervention by the Bank of Japan. By 1330 GMT, the dollar was up around 0.6 percent on the day at 1.2492 , down roughly four cents from Monday's record highs around $1.29000. and around 0.3 percent down against the yen at 106 .
STOCKS, BONDS
European stocks scaled fresh 16-month peaks as solid U.S. results helped boost optimism that companies this side of the Atlantic would turn in good report cards over the next couple of weeks. The FTSE Eurotop 300 index was up 0.7 percent to 987 points, with the narrower DJ Euro Stoxx 50 index rising a similar amount to 2,862 points. Earlier Japan's Nikkei average bounced back 1.8 percent to 10,857.20 after suffering on Thursday its biggest fall in a month. An MSCI index of Asia-Pacific shares outside Japan shed 0.4 percent, but remained near four-year highs. Markets were focussed on the next batch of U.S. data with the University of Michigan consumer confidence index, due at 1445 GMT and U.S. industrial production for December at 1415 GMT. Government bond yields fell sharply as speculation grew that the strength of the euro would push the ECB to cut interest rates. "Speculation about an ECB rate cut has triggered massive buying at the short ends from hedge funds," said one euro debt trader in London. "We've also had central bankers talking about the euro this week so this is also having an impact." The benchmark 10-year Bund was trading down 6 basis points yielding 4.09 percent. The two-year Schatz yield was down 9 basis points at 2.35 percent. Gold which slumped $15 an ounce on Thursday on profit taking was flat at $408.80/$409.55 against it New York close of $408.75.$409.50. Crude oil futures were up 36 cents at $29.70 after falling over a dollar a barrel in the previous session.//

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