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FOREX-Euro at 1-week low vs dollar following ECB cash infusion
March 1, 2012 / 7:39 PM / 6 years ago

FOREX-Euro at 1-week low vs dollar following ECB cash infusion

 * Euro edges lower in choppy trade
 * Euro falls to one-week low after U.S. consumption data
 * U.S. ISM also weighs on risk tolerance
 * Bernanke gives no QE hint

 (Updates prices, adds quotes, links and graphics, changes
 By Julie Haviv	
 NEW YORK, March 1 (Reuters) - The euro fell to a
one-week low against the dollar in choppy trading on Thursday as
U.S. economic data showed the recovery lost steam earlier this
year but remained in better shape than the euro zone.	
 U.S. manufacturing cooled in February and consumer spending
was flat in January for a third straight month. Other data,
though, showed new claims for jobless benefits fell to a near
four-year low last week while reports from retailers and
automakers on February sales were also upbeat. 	
 Prospects for a sustained economic recovery around the
globe, however, darkened as sputtering factory activity in
Europe overshadowed more positive data from Asia. 	
 The euro had already been weak before New York opened after
a huge injection of cash by the European Central Bank on
Wednesday and lingering concerns about debt and the fragile euro
zone economy. 	
 The euro was last down 0.1 percent to $1.3312 after
touching a one-week low of $1.3280, breaking near-term support
at its 100-day simple moving average of $1.3293. 	
 The euro hit a three-month high of $1.3485 on Wednesday,
according to Reuters data. The euro also posted its best monthly
performance in February since October. 	
 "The euro is now in a consolidation phase after a position
squeeze that started last week," said Greg Anderson, G10
strategist at CitiFX, a division of Citigroup, in New York.	
 "This consolidation should leave the euro at around $1.3250
by Friday's close," he predicted.	
 Testimony from Federal Reserve Chairman Ben Bernanke to a
Senate panel was closely watched but had minimal impact.	
 Repeating Wednesday's prepared remarks, the Fed chairman
cautioned that the recent steep drop in the U.S. unemployment
rate was unlikely to continue given a still-soft economy, but he
stopped short of signaling a further easing of monetary policy. 	
 Another round of asset purchases, or quantitative easing,
would be negative for the dollar as it is tantamount to printing
money. That contrasts with the ECB's recent cash infusion via
its Longer Term Refinancing Operation.	
 "Stocks are higher, but not the euro," said CitiFX's
Anderson. "One can argue that the market may be interpreting the
LTRO as a form of QE and we are getting a whiff of that in
today's trading."	
 "The market is starting to realize that QE3 is off the
table, though Bernanke still has a cautious tone," said David
Song, currency analyst at DailyFX. "Bernanke is a little more
dovish than yesterday, highlighting concerns about fiscal
responsibility and that the debt situation is unsustainable." 	
 Attention on Thursday also turned to a European Union summit
and a meeting of euro-zone finance ministers amid discussion of 
Greece's progress on meeting the terms of its latest bailout. 	
 Traders reported early euro selling by Asian central banks
and macro funds, with many cutting euro positions as the ECB's
injection of 530 billion euros in three-year funds had been
broadly priced in. 	
 Morgan Stanley analysts were more upbeat on the euro's
immediate prospects, raising their end-March euro/dollar
forecast to $1.34 from $1.27 as the ECB funds eased banking and
sovereign debt strains. They still expect the euro to decline
sharply by the end of the year, however, though they now see it
at $1.19 rather than $1.15.	
 The dollar was flat at 81.16 yen, remaining close to
a nine-month high touched on Monday as the yen remains under
pressure after Bank of Japan easing measures.	
 UBS strategists said that they expected the Fed to normalize
rates much earlier than the Bank of Japan, a policy divergence
that should lead to a widening of the gap between two-year
Treasuries and Japanese government bond yields.	
 The yield gap has a tight correlation with the dollar/yen
pair and a widening should see the dollar drift higher. As such,
UBS expects the dollar to rise to 85 yen by 2012 and 90 yen by
2013 and repatriation flows ahead of the Japanese financial year
end in March are unlikely to be yen supportive. 	
 (Additional reporting by Nick Olivari; Editing by Padraic

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