FOREX-Euro boosted by above-forecast euro zone inflation
Mon Jan 31, 2011 7:41am EST
* Euro gains as euro zone inflation data tops estimates
* Euro supported by Middle East buying, Asian sovereign bids
* Investors stay wary of Egypt unrest spreading (Adds detail, updates prices)
By Jessica Mortimer
LONDON, Jan 31 (Reuters) - The euro rose against the dollar on Monday as above-forecast euro zone inflation kept alive the view that interest rates in the region may rise sooner than previously thought.
The data helped the euro recover from losses resulting from safe-haven buying of dollars, as well as Swiss francs and yen, due to unrest in Egypt. Analysts said gains for these currencies may be limited unless the trouble spreads to other countries.
Traders cited Middle East accounts buying euros against the dollar, lending further support after data showed euro zone inflation rose to an annual rate of 2.4 percent in January from 2.2 percent in December, exceeding forecasts for a 2.3 percent rise. [ID:nBRLVCE7AU]
"(European Central Bank President Jean-Claude) Trichet has warned of a hump in inflation, this data shows a rise in inflation and the market has reacted to it," said Kit Juckes, currency strategist at Societe Generale.
"Important though Egypt is, the troubles there were more a catalyst for a correction in risk appetite rather than the onset of risk aversion," he added.
The euro EUR= was up 0.4 percent against the dollar at $1.3670, around a cent above a low of $1.3570 hit on trading platform EBS in Asian trading.
Euro zone inflation is well above the ECB's target to keep the rate below but close to 2 percent and will keep intact support for the euro based on the view that the European Central Bank will raise interest rates much sooner than the U.S. Federal Reserve.
The three-month Euribor rate EURIBOR3MD= -- traditionally the main gauge of unsecured interbank euro lending and a mix of interest rate expectations and banks' appetite for lending -- rose to 1.074 percent from 1.063 percent, the highest since July 2009. [ID:nEAP000437]
The euro also rose against other currencies which had gained as investors sought safety due to the Egypt unrest. Against the Swiss franc it was up 0.5 percent at 1.2894 francs EURCHF=, while it gained 0.5 percent to 112.36 yen EURJPY=.
MIDDLE EAST WORRIES
With street protests in Egypt showing no sign of abating, however, investors remained wary that political upheaval could hit other Arab countries, potentially disrupting oil production and heightening tensions in the region. [ID:nLDE70U00B]
"If the trouble really spreads and it pushes the oil price up even more, then that would probably spark more short-term flows into the dollar," said Karl Olsson, currency strategist at SEB in Stockholm.
Crude oil CLc1 was steady at $89.20 per barrel after making a brief show above $90 in European morning trade. It remained supported on Middle-East supply concerns and traded around four percent above Friday's low.
The Egyptian crisis was seen having the potential to overshadow economic events this week which include a slew of data such as U.S. non-farm payrolls and central bank decisions.
The dollar index .DXY was down 0.3 percent at 77.912, off a high of 78.325. The U.S. unit was up 0.1 percent at 82.16 yen JPY= and up 0.2 percent at 0.9430 Swiss francs CHF=.
Data showed speculators increased bets against the U.S. dollar and in favour of the euro in the latest week, but they also scaled back net long positions in the commodity-linked Canadian, Australian and New Zealand dollars. [IMM/FX] (Additional reporting by Neal Armstrong, editing by Stephen Nisbet/Toby Chopra)
Mon Jan 31, 2011 7:41am EST
* Euro gains as euro zone inflation data tops estimates
* Euro supported by Middle East buying, Asian sovereign bids
* Investors stay wary of Egypt unrest spreading (Adds detail, updates prices)
By Jessica Mortimer
LONDON, Jan 31 (Reuters) - The euro rose against the dollar on Monday as above-forecast euro zone inflation kept alive the view that interest rates in the region may rise sooner than previously thought.
The data helped the euro recover from losses resulting from safe-haven buying of dollars, as well as Swiss francs and yen, due to unrest in Egypt. Analysts said gains for these currencies may be limited unless the trouble spreads to other countries.
Traders cited Middle East accounts buying euros against the dollar, lending further support after data showed euro zone inflation rose to an annual rate of 2.4 percent in January from 2.2 percent in December, exceeding forecasts for a 2.3 percent rise. [ID:nBRLVCE7AU]
"(European Central Bank President Jean-Claude) Trichet has warned of a hump in inflation, this data shows a rise in inflation and the market has reacted to it," said Kit Juckes, currency strategist at Societe Generale.
"Important though Egypt is, the troubles there were more a catalyst for a correction in risk appetite rather than the onset of risk aversion," he added.
The euro EUR= was up 0.4 percent against the dollar at $1.3670, around a cent above a low of $1.3570 hit on trading platform EBS in Asian trading.
Euro zone inflation is well above the ECB's target to keep the rate below but close to 2 percent and will keep intact support for the euro based on the view that the European Central Bank will raise interest rates much sooner than the U.S. Federal Reserve.
The three-month Euribor rate EURIBOR3MD= -- traditionally the main gauge of unsecured interbank euro lending and a mix of interest rate expectations and banks' appetite for lending -- rose to 1.074 percent from 1.063 percent, the highest since July 2009. [ID:nEAP000437]
The euro also rose against other currencies which had gained as investors sought safety due to the Egypt unrest. Against the Swiss franc it was up 0.5 percent at 1.2894 francs EURCHF=, while it gained 0.5 percent to 112.36 yen EURJPY=.
MIDDLE EAST WORRIES
With street protests in Egypt showing no sign of abating, however, investors remained wary that political upheaval could hit other Arab countries, potentially disrupting oil production and heightening tensions in the region. [ID:nLDE70U00B]
"If the trouble really spreads and it pushes the oil price up even more, then that would probably spark more short-term flows into the dollar," said Karl Olsson, currency strategist at SEB in Stockholm.
Crude oil CLc1 was steady at $89.20 per barrel after making a brief show above $90 in European morning trade. It remained supported on Middle-East supply concerns and traded around four percent above Friday's low.
The Egyptian crisis was seen having the potential to overshadow economic events this week which include a slew of data such as U.S. non-farm payrolls and central bank decisions.
The dollar index .DXY was down 0.3 percent at 77.912, off a high of 78.325. The U.S. unit was up 0.1 percent at 82.16 yen JPY= and up 0.2 percent at 0.9430 Swiss francs CHF=.
Data showed speculators increased bets against the U.S. dollar and in favour of the euro in the latest week, but they also scaled back net long positions in the commodity-linked Canadian, Australian and New Zealand dollars. [IMM/FX] (Additional reporting by Neal Armstrong, editing by Stephen Nisbet/Toby Chopra)