Reuters: US Dollar Report: FOREX-Dollar index hits 1-month low, euro supported

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FOREX-Dollar index hits 1-month low, euro supported Mar 30th 2012, 08:53 Fri Mar 30, 2012 4:53am EDT * Dollar index falls to 1-month low * Euro rises, trades close to 1-month high vs dollar * EU ministers meet to boost rescue fund, Spain budget ahead By Jessica Mortimer LONDON, March 30 (Reuters) - The dollar fell to its lowest in a month against a basket of currencies on Friday, extending falls made earlier this week on expectations of further U.S. monetary stimulus and helping the euro gain before a euro zone finance ministers' meeting. The euro was supported by expectations the euro zone will agree to boost its bailout firepower in a bid to stop the debt crisis spreading. Market focus is also centreing on the Spanish budget, where the government is expected to announce harsh austerity measures in a bid to get the country back on a sustainable fiscal path, despite popular resistance. The dollar index fell to a one-month low of 78.727, staying pressured after dovish comments on U.S. monetary policy from Federal Reserve chairman Ben Bernanke and softer U.S. economic data earlier this week. Traders said it was also weighed down by selling related to month-end moves by portfolio investors and by steep losses against sterling, which hit a 4-1/2 month high. The euro was up 0.3 percent against the dollar at $1.3337, near a one-month peak of $1.3385 hit earlier this week. A euro zone agreement, coupled with Spain's budget announcement, expected around 1100 GMT, could boost it further in the short-term, traders and analysts said. However, the euro may come back under selling pressure in the coming weeks and months as concerns remain about unsustainable debt levels in some euro zone countries. "Raising the size of the euro zone bailout fund will be supportive for the euro, although the market is already aware of it," said Audrey Childe-Freeman, currency strategist at JP Morgan Private Bank. She expected any rise would be limited and saw the euro staying within its recent range between around $1.35 and $1.31, or possibly lower. Euro zone finance ministers are likely to temporarily almost double their financial backstops on Friday as one of the final moves to end the sovereign debt crisis, although Germany continues to favour a smaller increase. Many analysts expect Spain will struggle to implement its deficit reduction measures as austerity will damage an already anaemic economy. The dollar also hit a one-month low versus the Swiss franc while against the yen it was down 0.35 percent at 82.09 yen, having hit a three-week low of 81.830 yen. Even though this year's dollar rally against the yen has lost steam over the last three weeks, the greenback was still poised to end the Jan-March quarter nearly 7 percent stronger. ALL EYES ON EUROPE Koji Fukaya, chief currency strategist in Credit Suisse in Tokyo expects the euro zone concerns to re-emerge and believes the euro will resume its decline in the coming quarter after ekeing out a gain of 3.1 percent in this one. The euro stood at 109.68 yen, pulling away from a trough of 108.76 hit on Thursday, its lowest in one week. The higher-yielding Australian dollar was up 0.25 percent at $1.0391, helped by a pick-up in investors' appetite to take on risk and by gains in equities. Link this Share this Digg this Email Reprints

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