Reuters: US Dollar Report: FOREX-Euro retreats on concerns about ECB bond buys

Reuters: US Dollar Report Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

FOREX-Euro retreats on concerns about ECB bond buys Sep 4th 2012, 20:35 Tue Sep 4, 2012 4:35pm EDT * Euro lower; investors await ECB action * Risk of disappointment limits upside to euro * Weak ISM diminishes risk appetite By Gertrude Chavez-Dreyfuss NEW YORK, Sept 4 (Reuters) - The euro slid against the dollar on Tuesday after two days of gains as investors grew cautious that a European Central Bank plan to tackle the region's debt crisis may lack detail. Softer-than-expected data on U.S. manufacturing further eroded risk appetite, boosting the dollar's appeal as a safe haven for some investors. Investors, however, were more focused on the euro ahead of an ECB meeting on Thursday at which policymakers are expected to announce a bond-buying plan to help lower Spanish and Italian borrowing costs. That speculation was reinforced on Monday when ECB President Mario Draghi said central bank purchases of sovereign bonds of up to three years maturity did not constitute state aid. Many traders would rather wait and see if the ECB will deliver on its commitment to help out debt-plagued countries in the euro zone. "Market participants were a little bit anxious that the ECB may disappoint," said Steven Butler, director of FX trading at Scotia Capital in Toronto. "It may cut rates, but a lot of people are concerned that the ECB may not be able to get its act together to announce something really firm about the bond-buying program." Any move by the ECB to stem the debt crisis is expected to lower the additional cost of holding assets perceived to have higher risk. The euro was last down 0.2 percent at $1.2566, not far from the two-month high of $1.2636 touched last week. U.S. markets were closed on Monday for the Labor Day holiday, which increased volatility in Tuesday's New York session as traders had less time before the ECB meeting to stake their positions. Investors are hoping the ECB will at least reveal the range of maturities eligible for purchase and that conditions are not too stiff for peripheral countries to seek aid. But Neal Gilbert, currency strategist, GFT Forex in New Jersey, said if the ECB decides to delay its bond-buying program, "many traders who have been jumping on the euro/dollar-hope trade will be quite disgruntled, and their patience, which has already been worn thin, may disappear." Morgan Stanley strategists said they did not expect the euro to push much higher before the ECB meeting and would take profits at their $1.27 target if it was reached before Thursday. Additionally, investors are likely to be cautious about the euro given the economy is struggling, putting pressure on the ECB to lower interest rates in the coming months. French President Francois Hollande said on Tuesday that an EU leaders summit on Oct. 18-19 could finalize solutions, not just on debt-stricken Greece, but also Spain, whose government has so far resisted seeking an EU bailout despite a deep recession. FED EASING PROSPECTS Euro weakness against the dollar could be limited in the near term, however, by speculation the Federal Reserve may launch another bond buying program, known as quantitative easing, this month to boost the struggling U.S. economy. U.S. nonfarm payrolls data due on Friday are expected to provide an important gauge of the strength of the economy and the likelihood of further Fed easing. The dollar briefly trimmed gains against the euro earlier on Tuesday after a survey showed U.S. manufacturing shrank at its sharpest clip in more than three years in August, the third straight month of contraction, and firms hired the fewest workers since late 2009. "It's a disappointing number that can bring the Fed a step closer to offering more support to the U.S. economy," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. The dollar was firmer against the yen, helped in part by buying from Japanese importers. The U.S. dollar was up 0.2 percent against the yen at 78.42 yen. The dollar index was also up, by 0.2 percent at 81.348 . Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions