Forex - Dollar steady vs yen, euro in afternoon trade in Asia ahead of US data

HONG KONG (Thomson Financial) - The US dollar hardly moved against the euro and the yen in afternoon Asian trade on Tuesday as investors opted to move to the sidelines ahead of key economic data due for release later this week.

On Friday the US Commerce Department will announce last month's consumer spending, which accounts for more than two-thirds of gross domestic product. Before that, new homes sales for January will be out on Wednesday.

'The currencies are stuck in a pretty narrow range. The currency market is focused on the US economic data,' said David Mann, currency strategist at Standard Chartered Bank. 'We should see some further increase in dollar selling' should the data confirm market fears that the world's largest economy is on the brink of a recession.

At 1.00 pm (0500 GMT), the euro was quoted at 1.4829 dollars from 1.4832 in Tokyo this morning. The dollar was at 107.92 yen from 108.04.

The dollar, though, may strengthen gradually against major currencies in coming weeks because 'we are nearing the end of the dollar weakness,' said Mann.

Existing home sales stronger than expected; Lowe's reports 33% profit drop

Last update: 2:51 p.m. EST Feb. 25, 2008

NEW YORK (MarketWatch) -- U.S. stocks rallied Monday afternoon as investors found relief after Standard & Poor's affirmed its triple-A ratings for bond insurers MBIA and Ambac Financial.

"It was taking MBIA and Ambac off credit watch by S&P, both names rallied and are taking the whole market with them," said Art Hogan, chief market strategist at Jefferies & Co.

"The headlines appear to be more bullish than the negative underlying message," said analysts at Action Economics.

After rising more than 100 points earlier on, and detouring into negative territory, the Dow Jones Industrial Average was up 135.79 points to 12,516, with 24 of its 30 components posting gains.

The recent volatility in the stock market is likely to continue, with 150-point swings in the Dow likely, said Paul Nolte, director of investments at Hindsdale Associates.

"We've seen credit spreads widen out in the last few weeks; as long as they continue to widen, markets are still at risk because it indicates people are not interested in taking risk," said Nolte.

Energy, financials lead benchmark to higher close

The benchmark S&P/TSX Composite Index rose 76.38 points, or 0.6%, to 13,585.93.

On the Toronto Stock Exchange, advancers led decliners 819 to 754.

Seven of the TSX's 10 component sector gauges finished in positive territory, with the financial sector and the energy gauge both adding about 1%.

Royal Bank of Canada ended 0.2% higher, reversing earlier sharp losses. The country's largest bank announced an all-stock takeover offer for independent fund manager Phillips, Hager & North Investment Management Ltd.

Bank of Montreal (CA:BMO: news, chart, profile) rose 1.2% and Canadian Imperial Bank of Commerce (CA:CM: news, chart, profile) rose 2.8%.

The late recovery in financial issues came after CNBC reported that a plan by several big banks to bail out struggling U.S. bond insurer Ambac Financial could be unveiled on Monday or Tuesday.

Crude-oil futures ended Friday's volatile session modestly higher, with the front-month benchmark contract ending near $99 a barrel. See Futures Movers.

EnCana Corp. (CA:ECA: news, chart, profile) , the nation's second-largest energy producer by revenue, rose 1.1%.

Oil and gas industry helicopter operator CHC Helicopter Corp. (CA:FLY.A: news, chart, profile) surged 38.3% on news that it will be acquired by U.S. private-equity firm First Reserve Corp. in a deal reportedly valued at C$1.5 billion ($1.48 billion).

Uranium One Inc. (CA:UUU: news, chart, profile) was the most actively traded issue by volume for a second straight day, shedding 13.1% after a 17.4% drop Thursday, when it cut its 2008 production forecast.

FOREX-Strong services PMI sends euro to 2-week high vs dlr

LONDON, Feb 22 (Reuters) - The euro hit a two-week high versus the dollar on Friday as stronger than expected euro zone service sector data contrasted with regional U.S. factory activity putting on its weakest show since the last recession.

The euro zone services PMI rose to 52.3 in February from 50.6 the previous month, moving away from the 50 watermark between contraction and growth and further dampening expectations of near-term interest rate cuts.

That was in stark contrast to Thursday's Philadelphia Fed's business index which fell to minus 24 in February, showing the deepest contraction in activity since 2001 and much worse than forecasts for minus 11. [ID:nN21572086]

U.S. markets are now fully pricing in a 50 basis point cut at the Federal Reserve's next meeting in March to 2.50 percent and factor in a small chance of an even bigger 75 basis points.

That would add to an unusually aggressive 125 basis points of cuts in January as the Fed tries to fend off a recession in the world's biggest economy. FEDWATCH

"It is a weak dollar story more than anything else. As you saw yesterday the Philly Fed was really what hurt the dollar," said Niels Christensen, FX strategist at Nordea in Copenhagen.

The euro rose to a two-week high of $1.4850 , from around $1.4815 before the PMI data.

Asian stocks gain with Wall Street on hopes for Ambac bailout

25 February 2008

Asian stocks end mostly higher Monday, tracking late-day gains on Wall Street Friday on a report that a rescue package for struggling bond insurer Ambac Financial could be announced this week.

The Dow Jones Industrial Average reversed early losses to close up about 97 points after cable news channel CNBC reported that a bailout for Ambac could come Monday or Tuesday.

'It always helps to see the US market go up,' said Andrew Sekely, head of Australian equities at Intersuisse.

Financial stocks rose across the region and pulled benchmarks higher. The Nikkei led the advance, closing up 3.1 percent at 13,914.57. The Topix rose 2.6 percent to 1,355.54.

'Although [the Ambac bailout] will not resolve the whole problem of monoline bond insurers, it will at least ease some concerns, as one negative factor may disappear,' said Soichiro Monji, chief strategist at Daiwa SB Investments.

Forex - Dollar up on talk of Ambac rescue; Australian dollar enjoys solid gains

CNNMoney.com (February 25, 2008: 04:39 AM EST)

LONDON, Feb. 25, 2008 (Thomson Financial delivered by Newstex) -- The dollar remained well-supported against major currencies, boosted by reports of a rescue plan for troubled bond insurer Ambac Financial Group (NYSE:AKT) (NYSE:AKF) (NYSE:AFK) (NYSE:ABK) , while a pick-up in risk appetite gave a significant boost to the high-yielding Australian dollar.

Market sentiment has been bolstered by a report late Friday of the rescue for Ambac, which had risked losing its AAA credit rating due to losses on securities linked to unpaid housing mortgages.

'News that Ambac looks likely to receive a bail-out has done something to build confidence and the greenback has posted some gains as a result,' said Gary Thomson, head of sales trading at CMC Markets.

Meanwhile, Asian equities were boosted overnight by a newspaper report suggesting that China's new sovereign wealth fund plans to buy up Japanese stocks.

The pick-up in risk appetite meanwhile has given a further boost to the high-yielding Australian dollar, which hit a fresh three and a half month high against its US counterpart of 0.9264 usd.

The Australian currency has benefited from sharp rises in the gold price, a buoyant economy and the Reserve Bank of Australia's recent interest rate hike.

'With gains of 2 pct so far this month taking it to year-to-date highs, the Aussie looks well-positioned to challenge last October's 24-year high against the US dollar and some positive Australian lead economic indicators on Wednesday would certainly help in that respect,' said Neil Mellor at the Bank of New York Mellon. (NYSE:BK)

Elsewhere, the pound was on the weak side after the latest Hometrack survey showed UK house prices fell for the fifth consecutive month and as investors awaited mortgage lending data from the British Bankers' Association this morning.

Later today, attention will turn to the release of US existing home sales data this afternoon and a speech tonight by European Central Bank president Jean-Claude Trichet.

Forex - US dollar rebounds vs euro, yen on hopes for Ambac bailout

Forbes Magazine (25 February 2008)

HONG KONG (Thomson Financial) - The US dollar rebounded against the euro and yen in afternoon trading in Asia on Monday, buoyed

by speculation of a rescue plan for troubled bond insurer Ambac Financial Group

Ambac risked losing its AAA credit rating due to losses on securities linked to unpaid housing mortgages. The insurer may announce this week a rescue package that includes a fresh capital infusion arranged by a group of lenders.

'The dollar got some boost from the report late Friday about the rescue package for Ambac. It's one less thing to be nervous about and provides a relief for the troubled credit market,' said David Cohen, director of Asian economic forecasting at Action Economics.

At 1.00 pm (0500 GMT), the euro was down at 1.4812 dollars from 1.4834 dollars in Sydney this morning. One dollar was buying 107.38 yen, up from 107.20 yen.

'The dollar's strength is a late reaction on Ambac,' said Tim Condon, research head at ING Financial Markets. 'It's also a reflection of the growing risk appetite of investors.'

Investors were encouraged to borrow from Japan, where the 0.5 percent benchmark rate is the lowest among developed countries, and invest the proceeds in higher-yielding securities including stocks elsewhere, weakening the yen.

Asian stock markets including Japan, Hong Kong and South Korea were mostly higher this

morning, tracking gains on Wall Street Friday.

Over the next few weeks, the dollar will continue to remain under pressure on speculation that

the Federal Reserve will further trim its key interest rates while the European Central Bank is likely to keep rates unchanged in the first half of 2008.

'The pressure on the dollar will not go away. There are views that the US is on the brink of a recession. But we have yet to get a confirmation on that,' said Action Economics' Cohen.

The Fed may cut rates by 50 basis points when policy makers meet on March 18, Cohen said. The Fed has slashed rates by a cumulative 225 basis points since September.

In the meantime, the market will be keeping an eye on US economic data releases that this week include last month's consumer spending and home sales, both new and existing.

The Fed last week cut its 2008 growth forecast for the US economy to 1.3-2.0 percent from as much as 2.5 percent, while raising its inflation estimates.

The ECB followed the Fed in reducing its growth estimate and raising its inflation expectations.

Inflation in the 15-member euro zone area may rise to an average of 2.6 percent this year from a previous estimate of 2.1 percent, raising speculation that the ECB won't cut rates soon to boost the region's economy.