By Ye Xie and Alex Lange
Feb. 5 (Bloomberg) -- The euro declined the most against the dollar in almost two months after Europe's service industries weakened and raised concern that Jean-Claude Trichet's reluctance to cut interest rates will hamper growth.
The euro fell versus 11 of the 16 most-active currencies as European industries expanded at the slowest pace in more than four years last month. The yen gained against most major currencies and pared its loss against the dollar after U.S. service industries unexpectedly contracted in January, as traders increased bets the Federal Reserve will cut interest rates a half-percentage point next month.
``The market may be rewarding those currencies where central banks are pro-growth,'' said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. ``The ECB is checking the economy, while the Fed is trying to contain the downside risks to growth.'' Read More here
Australian Dollar May Fall to 77 U.S. Cents, Says BNP (Update1)
By Anchalee Worrachate
Feb. 5 (Bloomberg) -- Investors should sell the Australian dollar on growing signs the fallout from the U.S. subprime- mortgage crisis is spilling into the nation's financial markets, according to BNP Paribas SA, France's biggest bank.
The currency, known as the Aussie, will decline to 77 U.S. cents by year-end and 65 cents by the end of 2009, according to Hans-Guenter Redeker, global head of currency strategy at BNP. The currency was at 90.43 U.S. cents by 10:46 a.m. in London, from 90.82 cents yesterday.
The Aussie has strengthened 17 percent against the U.S. dollar in the past 12 months, making it the third-best performer of the 16 most-traded currencies tracked by Bloomberg. Investors have been lured by rising commodity prices and an economy that has grown for 17 straight years. Australian manufacturing shrank for the first time in almost two years in January, while consumer and business confidence weakened, signs the economy may be cooling as the slowdown in the U.S. spreads around the world.
``The market's love affair with the Aussie dollar will soon be over,'' Redeker, who correctly predicted the yen would rise by the end of last year, said in an interview yesterday. ``There's no way Australia will escape the impact of the global financial turmoil. We are bearish on the currency.''
The Aussie rose versus the euro and the yen today after the Reserve Bank of Australia raised interest rates by 25 basis points to 7 percent, further boosting the currency's yield advantage over low-yielding assets. It traded at 1.6225 per euro from 1.6329 yesterday.Read more here...
Canada's Dollar Falls on Concern Commodity Demand Will Drop
By Haris Anwar
Feb. 5 (Bloomberg) -- Canada's currency fell the most in a month on concern that a slowdown in global growth will reduce demand for the nation's commodity exports.
Traders sold currencies tied to global growth and demand for commodities as the U.S. economy falters and data from Europe suggested the international economy may face a potential slowdown.
``A fear of a possible U.S. recession is taking its toll on commodity currencies,'' said Andrew Chaveriat, a technical foreign-exchange strategist at BNP Paribas Securities SA in New York. ``The U.S. dollar is going to continue this rally as people avoid risky bets, and we may see some weakness in the Canadian dollar.''
Canada's currency, known as the loonie after the image of the bird on its one-dollar coin, fell 1.3 percent, the most since Jan. 4, to C$1.0068 per U.S. dollar at 10:50 a.m. in Toronto. One Canadian dollar buys 99.32 U.S. cents.
Prices of the nation's commodity exports also declined. Crude oil for March delivery fell about $2, or 2 percent, to $88.27 a barrel. Gold for immediate delivery dropped $14.90, or 1.6 percent, to $894.40 an ounce in London. Commodities account for about half of Canada's exports. Read more here
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