FOREX-Euro hurt by Greek uncertainty, dollar helped by rate outlook

* Dollar firmer vs yen and euro

* Euro weighed down by uncertainty over Greece

* Yellen’s message on gradual tightening provides no fresh impetus (Recasts, fresh quotes, updates prices)

By Anirban Nag

LONDON, March 30 (Reuters) – The euro fell on Monday, hurt by uncertainty over whether Greece and its international creditors will be able to strike a deal that will help Athens secure funding before it runs out of money by April 20.

Talks continued through the weekend on reforms to unlock loans and Athens sounded an upbeat tone, but the lenders said it could take several more days before a proper list of measures was ready.

The dollar rose broadly, helped by comments from Federal Reserve chair Janet Yellen, who underscored the view that the Fed is likely to start raising interest rates gradually later this year.

The dollar edged up 0.3 percent to 119.50 yen, while the euro fell 0.6 percent to $ 1.0830, having in the last two weeks pulled away from a 12-year trough of $ 1.0457.

“Even though euro short positions are at record highs, given the Greek uncertainty and the bias for more monetary injection by the European Central Bank, the path for least resistance is a lower euro/dollar,” said Jeremy Stretch, head of currency strategy at CIBC World Markets.

“Unless the euro drops below $ 1.0770 we could see ranged trading, but with the Fed still looking to raise rates, we could see conditions later this week that are more helpful for overall dollar strength.”

U.S. jobs data on Friday will be a key event for the dollar this week and a robust report could see investors position for tighter monetary policy sooner rather than later.

In a speech on Friday, Yellen outlined the case for a ‘gradualist approach’ to rate hikes, in comments mirroring those at the post-FOMC meeting on March 18. She signalled the Fed will likely start raising borrowing costs later this year but said policy tightening could “speed up, slow down, pause, or even reverse course” depending on actual and expected developments in the economy.

“Yellen went to great length to detail why rate hikes would not be rushed and ultimately may not reach levels previously considered to be ‘normal’,” said Ray Attrill, global co-head of FX strategy at National Australia Bank.

“Our take is that while rates may rise sooner and faster than current market pricing, they are more likely to undershoot than overshoot the Fed’s latest median ‘dot point’ trajectory.”

Still, the diverging rate pathways between the Fed and most of the developed world meant the dollar should stay supported.

“Our view of the U.S. dollar remains broadly positive and we have always viewed that the correction of the past two weeks in the U.S. dollar is temporary,” said Heng Koon How, senior FX strategist for private banking and wealth management at Credit Suisse in Singapore.

(Additional reporting by Masayuki Kitano; Editing by Susan Fenton)

FOREX-Dollar supported even as Yellen drives home message of patience

* Dollar firmer vs yen and euro

* Yellen’s message on gradual tightening provides no fresh impetus

* Commodity currencies continue to underperform (Adds comments, updates prices)

By Ian Chua and Masayuki Kitano

SYDNEY/SINGAPORE, March 30 (Reuters) – The dollar inched higher versus the yen and euro on Monday after the head of the U.S. Federal Reserve underscored the view that the Fed is likely to start raising interest rates gradually later this year.

The dollar edged up 0.1 percent to 119.24 yen. It has fallen more than 2 percent from a near eight-year peak of 122.04 set early this month.

The euro slipped 0.2 percent to $ 1.0873, having in the last two weeks pulled up from a 12-year trough of $ 1.0457.

In a highly anticipated speech on Friday, Fed Chair Janet Yellen outlined the case for a ‘gradualist approach’ to rate hikes, in comments mirroring those at the post-FOMC meeting on March 18.

She said policy tightening could “speed up, slow down, pause, or even reverse course” depending on actual and expected developments in the economy.

“Yellen went to great length to detail why rate hikes would not be rushed and ultimately may not reach levels previously considered to be ‘normal’,” said Ray Attrill, global co-head of FX strategy at National Australia Bank.

“Our take is that while rates may rise sooner and faster than current market pricing, they are more likely to undershoot than overshoot the Fed’s latest median ‘dot point’ trajectory.”

The diverging interest rate pathways between the Fed and most of the developed world meant that the dollar should in general stay supported.

“Our view of the U.S. dollar remains broadly positive and we have always viewed that the correction of the past two weeks in the U.S. dollar is temporary,” said Heng Koon How, senior FX strategist for private banking and wealth management at Credit Suisse in Singapore.

“We expect the Fed to start hiking rates possibly by the September FOMC and the process will likely be gradual,” he said, adding that the dollar would probably stay strong heading into the start of the Fed’s policy tightening cycle.

A key event for the dollar this week is U.S. jobs data on Friday.

Commodity currencies edged lower, partly unsettled by further falls in oil and iron ore prices last Friday, when oil prices slid 5 percent. On Monday, benchmark Brent crude oil futures slipped 0.5 percent to $ 56.13 a barrel.

The Aussie eased 0.3 percent to $ 0.7729, continuing to retreat from a two-month peak of $ 0.7939 set a week ago. It was nearing a six-year trough of $ 0.7561 plumbed early this month.

(Editing by Eric Walsh & Kim Coghill)

FOREX-Euro rallies as traders speculate on SNB intervention

* Swiss franc at weakest vs euro since SNB scrapped cap

* Euro hit overnight after Greece loses ECB safety net

By Jemima Kelly

LONDON, Feb 5 (Reuters) – The euro rose strongly across the board on Thursday, gaining more than 1 percent against the Swiss franc, as traders speculated that the Swiss National Bank was again buying euros in order to weaken the franc.

Having fallen around two U.S. cents late on Wednesday after the European Central Bank said it would no longer accept Greek bonds in return for funding, the euro gained around 0.7 percent versus the dollar on Thursday, trading at $ 1.1420.

Against the Swiss franc, the euro rose to 1.06425 francs, its strongest since Jan. 15, when the SNB stunned markets by scrapping the three-year-old cap on its currency.

Since then, there has been persistent talk that the SNB has still been intervening. Swiss newspaper Schweiz am Sonntag reported on Sunday that the SNB was informally aiming for a rate of 1.05-1.10 francs per euro, citing sources close to the bank.

The SNB on Thursday again declined to comment on whether it was intervening in the market.

“I do think they (the SNB) are intervening at this point,” said Peter Rosenstreich, chief FX analyst at Swissquote in Geneva.

“But is this part of a managed strategy to control euro/Swiss (franc)? I think it’s way too early to be discussing that. At this point they’re just trying to stabilise the downside and take advantage of any opportunities to push (the euro) higher.”

Against the yen, the euro was up 0.8 percent at 134.09 yen , still some way off a near two-week high of 135.35 yen set on Wednesday.

The shared currency had earlier been lifted by data showing German industrial orders surged far more than forecast in December, hitting their highest level since April 2008.

“We still think the main driver of the euro over the next few months will be QE, and policy divergence with the UK and the U.S.,” said Stephen Saywell, global head of FX strategy at BNP Paribas in London.

Losses against the euro helped the dollar fall around 0.7 percent against a basket of currencies, extending a more than 1.5 percent decline over the past two weeks.

The Australian dollar also rose against the greenback, trading at $ 0.7811, up 0.8 percent on the day and edging further away from a six-year trough of $ 0.7627 set earlier in the week.

More Danish rate cuts seen; next stop — wider FX band

* Crown seen as safer haven since Swiss scrapped cap

* Denmark using rate cuts, intervention to curb crown

* Still has bolder option of widening trading band

* Analysts do not see Denmark scrapping its peg

By Ole Mikkelsen

COPENHAGEN, Jan 30 (Reuters) – Denmark is likely to cut its deposit rate deeper into negative territory and could widen the crown’s trading band if bolder action is needed to relieve pressure on its currency peg.

Investors have piled into the Danish crown since the Swiss central bank shocked markets on Jan. 15 by scrapping the franc’s cap to the euro and cut interest rates to levels that are below Denmark’s, making the crown more attractive.

The European Central Bank’s decision last week to launch a landmark bond-buying programme with new money to weaken the euro has also bolstered the crown.

Rising pressure on the currency has spurred speculation that Denmark may follow the Swiss and scrap its 15-year-old peg to the euro. But, analysts say that is unlikely, pointing to a number of other options the central bank can resort to before having to consider abandoning the regime.

Under the European Union’s Exchange Rate Mechanism (ERM2), Denmark agreed to keep the crown at 2.25 percent either side of the parity rate of 7.46038 crowns to the euro. But in practice, the crown has not moved more than 0.5 percent on either side, as central bank intervention, when necessary, has kept it in check.

“The central bank has several tools they can use before they have to give up the fixed currency policy and so far they have only used two,” said Citi Economist Tina Mortensen.

“In addition to lowering interest rates further, they can build up reserves. But they can also reintroduce a three-year lending facility and they can use the fluctuation band more … Denmark can let the currency fluctuate 15 percent around the central parity and still meet ERM2 requirements,” she said.

While Denmark agreed to keep its currency very close to the euro, ERM2 rules allowed currencies of other participants, ranging from Cyprus and Malta to Slovenia and Lithuania, to fluctuate 15 percent either side of parity as a general rule.

A sluggish economic recovery in the European Union, prospects of deflation in some countries and political uncertainty due to factors such as the election of the far-left Syriza party in Greece are all weighing on the euro.

“With many uncertainties still facing the euro area and with Danish monetary policy already loose, the pressure will likely remain … and a recalibration of the current trading range cannot be ruled out,” Bank of America Merrill Lynch said in a note to clients.

RESERVES AT RECORD?

Before a potential widening of the trading range, however, the central bank still has plenty of room to keep intervening and cutting interest rates to curb the crown. At the very least it could lower its benchmark rate to -0.75 percent to match the Swiss rate, or below, analysts said.

On Thursday, the Danish central bank cut its key rate to -0.50 percent, the third cut in two weeks.

Unlike Russia, which is burning up its foreign reserves to defend the ailing rouble, undermining financial stability, Denmark is building its reserves by intervening to curb a strengthening currency.

Jes Asmussen, chief economist at Handelsbanken Capital Markets, estimates that in January the central bank spent a record $ 100 billion ($ 15 billion) in foreign exchange markets by selling crowns to weaken the currency.

That suggests foreign reserves — which stood at 447 billion crowns ($ 68 billion) at the end of December, or a quarter of Danish gross domestic product — could bypass their record level of 514 billion crowns, held in July 2012. Foreign currency reserves data is due on Feb. 3.

As the Swiss central bank’s policies show, there is such a thing as having too much in reserves. The Danish level, however, is far off the 100 percent of GDP that the Swiss National Bank held before it scrapped the franc’s cap.

“The market is testing the central bank at the moment. The question is when the market realises that the central bank will insist on keeping the crown close to the euro,” chief economist Helge Pedersen from Nordea said. ($ 1 = 6.5837 Danish crowns) (Additional reporting by Anirban Nag in London; Editing by Sabina Zawadzki and Susan Fenton)

Euro hits four year low on expectation of QE

The euro has taken another downward lurch today, sinking to a four-and-a-half-year low against the dollar on clear indications that the European Central Bank will soon embark on outright money-printing.

Yields on government bonds issued by the euro zone’s heavily indebted southern member states – which the bank would be expected to buy in any such campaign of quantitative easing – fell after ECB President Mario Draghi said the risk of it falling short of its mandate on inflation targeting had risen compared to six months ago.

Stock markets in Europe turned lower after initial gains, driven by a downward revision of purchasing manager surveys for France and the euro zone as a whole.

The divergence expected between European and US monetary policy in 2015 dominated currency markets’ thinking last year, and Draghi’s warning the ECB was preparing for more action added to expectations that it will step in soon.

“The risk is on the downside for the euro after these comments,” said Niels Christensen, an FX strategist at Nordea in Copenhagen.

“It could break below $ 1.20 since there is a risk of a very low inflation reading out of the euro zone next week. That will just add to pressure on the ECB to take measures when it meets later this month.”

The ECB, which targets inflation at just below 2%, next meets on policy on 22 January. Euro zone inflation next Wednesday is forecast to show prices falling in annual terms.

The interest rate premium investors demand to buy Spanish over German bonds dipped below 100 basis points for the first time since April 2010, reflecting expectations yields in Spain, Italy and Portugal would fall in any QE campaign.

The euro sank as far as $ 1.2035, depths last seen in mid-2010, while the dollar notched up a near nine-year peak against a basket of major currencies .

Oil prices remained fragile after a savaging in the second half of 2014. US crude futures CLc1 added 20 cents to $ 53.46 a barrel, while Brent fell 13 cents to $ 57.20.

“Many of the themes that were in vogue heading into the end of the year remain very much firmly in place,” said Callum Henderson, global head of FX research for Standard Chartered Bank in Singapore. “The US recovery is not stellar but it’s certainly materially better than in most places in the G10.”

China yesterday reported its official Purchasing Managers’ Index (PMI) slipped to 50.1 in December, the lowest level of 2014 and barely in expansion territory. That blow was softened by a rise in the service sector PMI to 54.1.

Euro edges up in Asia ahead of Greek presidential vote

The euro edged up in Asia on Monday as lawmakers in debt-laden Greece embark on a final bid to elect a new president and avoid a snap election that could undermine its international bailout.

In Tokyo, the single currency strengthened to $ 1.2188 and 146.61 yen, from $ 1.2179 and 146.59 yen in New York on Friday.

The definitive round of voting later Monday to choose a successor to President Karolos Papoulias comes during last-ditch efforts by Prime Minister Antonis Samaras to get the government’s candidate elected and avert early polls.

If no president is chosen, a general election will automatically be triggered.

European Union and International Monetary Fund officials fear an early poll would be won by the anti-austerity, radical leftist Syriza party and could undo many of Greece’s fiscal reforms.

But analysts said currency markets have largely factored in the success of a presidential vote, while upbeat US data has been supporting the dollar, which was slightly lower at 120.31 yen on Monday, against 120.37 yen in US trade.

“There will be no change in the underlying trend of a stronger dollar,” said Shinji Kureda, head of FX trading group at Sumitomo Mitsui Banking Corp.

Expectations of a mid-2015 interest rate rise by the US Federal Reserve have been boosting the dollar on expectations that the Bank of Japan could go in the opposite direction and further expand its already huge monetary easing programme.

The dollar was mostly firmer against other Asia-Pacific currencies.

It rose to 12,465.00 Indonesian rupiah from 12,394.00 on Friday, to Sg$ 1.3223 from Sg$ 1.3221, to 32.93 Thai baht from 32.91 baht, and to 63.69 Indian rupees from 63.62 rupees.

It also advanced to Tw$ 31.85 from Tw$ 31.71 and to 44.77 Philippine pesos from 44.70 pesos.

The greenback weakened to 1,097.60 South Korean won from 1,099.23 won.

The Australian dollar bought 81.32 US cents against 81.24 cents, while the Chinese yuan was at 19.33 yen from 19.36 yen.

— Dow Jones Newswires contributed to this article —

Currencies: U.S. dollar rallies; euro drops below $1.33

NEW YORK (MarketWatch) — The U.S. dollar continued its advance against key rivals on Wednesday, as the euro dropped below $ 1.33 and the greenback rose above ¥103.

The dollar’s strength comes on the back of Tuesday’s strong housing numbers that suggested one of the Federal Reserve’s key indicators of economic health is rebounding.

The data “has given the market more confidence that the Fed is likely to start hiking rates soon. Fed Chair Janet Yellen has cited the weakness in the housing market as one reason for being cautious,” said Marshall Gittler, head of global FX strategy at IronFX in a note.

More clues about the Fed’s thinking on rate hikes may come later Wednesday, when the central bank releases the minutes from its last policy meeting at 2 p.m. Eastern. On Friday, Fed chairwoman Janet Yellen will give a speech at the Jackson Hole economic symposium, which may add further color.

Read: How the Fed could exit its easy monetary policy

The followthrough from the housing data combined with easing tensions over Ukraine to push gauges of the dollar strength over some key round numbers. The dollar bought 103.30 Japanese yen USDJPY, +0.44% jumping over ¥103 for the first time since April. The currency pairing traded at ¥102.91 late Tuesday. The yen fell after Japan logged a larger-than-expected trade deficit in July.

The euro EURUSD, -0.25%   fell to $ 132.88 on Wednesday from $ 133.21 late Tuesday, its lowest since last September on a closing basis.

Also read: When PIIGS fly, everything you know about euro crisis is wrong, says Matthew Lynn

The British pound GBPUSD, +0.04%  changed hands at $ 1.6647, up from $ 1.6621. Sterling had fallen sharply in the previous session. Minutes released by the Bank of England showed dissent among policy members about when the central bank should begin raising rates. Also read: Inflation may still hold back BOE rate hike

The U.S. dollar index DXY, +0.21%  , which measures the greenback against key rivals, rose to 82.036 from 81.876 on Tuesday, marking a fresh 11-month high.

Still, dealers caution the dollar’s advance may not accelerate further because Treasury yields remain low, with the 10-year note 10_YEAR, +0.54%  yield at 2.42%. The Fed has been maintaining its view that the economy is recovering only gradually despite some strong data. “The Fed says figures aren’t that great. It’s too early to believe in the recovery,” said Kosuke Hanao, head of FX at HSBC in Tokyo.

ECB's Draghi says appreciated FX rate a risk to recovery

STRASBOURG France (Reuters) – A stronger euro exchange rate is a risk to the sustainability of the euro zone recovery, European Central Bank President Mario Draghi said on Monday, while stressing that he has no plans to leave the bank.

Draghi reiterated his position that the exchange rate is not a policy target for the ECB, but said it was nonetheless an important driver of future inflation in the euro area.

“Certainly, the appreciation that took place since mid-2012 had an impact on price stability,” Draghi told the European Parliament’s Committee on Economic and Monetary Affairs in Strasbourg.

“In the present context, an appreciated exchange rate is a risk to the sustainability of the recovery,” he added.

The ECB has faced pressure from the French government to bring down the euro’s exchange rate, as a stronger euro risks hurting euro zone members’ exports.

The head of planemaker Airbus (AIR.PA), Fabrice Bregie, has also called on the ECB to take steps to devalue the common European currency to help exporters who are being hit by a strong euro.

The ECB cut interest rates to record lows last month as part of a package of measures to breathe life into a sluggish euro zone economy.

Draghi said the moderate recovery in the euro zone was expected to continue but that risks to the outlook were on the downside.

“The Governing Council is unanimous also in using also unconventional measures to address the risk of a too prolonged period of too low inflation,” if needed, he said.

“QE falls squarely in our mandate,” he added with reference to so-called quantitative easing, or money printing to buy assets.

Answering a question about reports he may leave his post and return to Italy, Draghi said he had no plans to leave the ECB.

“I am at the ECB and I’ll stay at the ECB, and all the rumours to the contrary, coming from some interested parties perhaps, are unfounded,” he said.

(Additional reporting by Paul Carrel and Maria Sheahan in Frankfurt, and by Martin Santa in Brussels; Editing by Susan Fenton and David Evans)

ECB should look at FX rate in policy debate, Coeure says

PARIS, May 23 (Reuters) – The European Central Bank should take account of the euro’s exchange rate in its monetary policy deliberations, ECB policymaker Benoit Coeure said on Friday, adding that central banks need to cooperate to avoid a currency war.

In a speech on “Currency wars and the Future of the International Monetary System”, Coeure asked whether, from the ECB’s perspective, central banks should take account of exchange rates in monetary policy, whether there is a currency war now, and whether international cooperation is needed in this regard.

He replied “Yes, but it’s complicated,” to the question of whether central banks, in the ECB’s view, should look at the exchange rate.

Answering the question of whether there is a currency war, he said: “No. But it may come, so we need a framework for cooperation to prevent it occurring.”

The G20 doctrine of avoiding competitive devaluations was still being respected, Coeure told a conference in Paris organised by the Fondation Maurice Allais, adding this situation was a “positive sum game” for the world economy.

(Reporting by Paul Taylor and Paul Carrel)

Euro joins the currency wars

Then he uttered the magic words, “comfortable with acting next time” and the euro has been on a one-way ticket down. It’s now sitting at nearly three-month lows against the dollar and the yen.

With those words, Draghi raised expectations of easing policy in June.

“The ECB has now officially joined the increasing list of central banks directly or indirectly targeting their exchange rate since the global financial crisis,” wrote Bank of America Merrill Lynch strategists led by Athanasios Vamvakidis after the meeting.

“The ECB’s references against euro strengthening—rather than calling directly for a weaker currency—to address deflation risks do not cross the line of G20 commitments against beggar-thy-neighbor policies in our view, but certainly are not fully consistent with market-driven exchange rates,” they added.

In other words, the ECB isn’t breaking any international taboos of directly intervening in the currency market, but indirectly, it’s talking the euro down.

Talk is one thing, action is another. Strategists say for the euro to continue weakening, Draghi must pull the trigger. The question is what will he do?

Read More Europe’s crisis not over yet: IMF’s Lagarde

Reports indicate the ECB is prepping a mix of policies including cutting interest rates and targeted measures to boost lending to small and mid-sized businesses. Reuters mentioned deposit rates going negative for the first time, citing people familiar with the measures.

What would be the goal of this? To stimulate bank liquidity in Europe to boost lending, business activity, jobs, growth and inflation.

The side effect and perhaps the most important form of stimulus would come in the form of a weaker euro.

“While it is likely to remain unspoken, the best option for the ECB would probably be a large depreciation of the EUR, aiding export-driven sectors and increasing measured price changes,” according to Bob Sinche, FX strategist at Pierpont Securities.

It’s a page right out of the post-crisis central bank playbook. First came the Fed, then the Bank of Japan, and now it’s the ECB’s turn.

So will Draghi win the currency war by managing to steer the currency to sustained weakness?

“It is going to win only by default,” according to FX strategist Sebastien Galy of Societe Generale. “The ECB is targeting the expensive Euro via negative interest rates trying to frighten reserve managers into either extending the maturity of their money market positions, deposit with commercial banks or reduce their euro exposure. ”

Read More Europe closes lower on disappointing GDP data

What is the problem with the currency war? Everyone must defend their own currencies from losing or getting too strong.

Namely, emerging markets currencies have been the losers, with their currencies strengthening against the more dovish developed markets.

In a Brown Brothers Harriman note this week, strategists led by Marc Chandler wrote, “So now some EM central banks are changing sides in the market from selling to buying dollars. No, currency wars are not back. But yes, we are seeing a pickup in FX intervention, notably in Korea, Colombia, Brazil and Israel.”