April 12, 2019 / 7:28 PM / 2 months ago

FOREX-Dollar weakens as euro rides demand linked to cross-border deal

    * Dollar index sags, weighed down by euro's strength
    * Sterling lifted as immediate Brexit risks recede

 (Updates market action)
    By Saqib Iqbal Ahmed
    NEW YORK, April 12 (Reuters) - The dollar weakened against
the euro as the common currency climbed in a move dealers said
may have been driven by anticipated currency demand arising from
a Japanese bank's plans to purchase a German multi-billion
dollar aviation finance business.
    Signs of economic stabilization in China and a strong start
to U.S. corporate earnings season boosted demand for riskier
assets, leaving the dollar to turn in its worst weekly
performance against the euro in four weeks.
    The euro        was 0.4% higher against the dollar at
$1.1295, its highest since March 26. 
    Speculators were buying the euro in response to reports on
Mitsubishi UFJ Financial Group's          planned purchase of
the aviation financing business of Germany's DZ Bank, dealers
said. The transaction was announced on March 1 and MUFG said it
was expected to close after June.             
    "The euro was well-supported in the Asian session on
Japanese demand on the crosses but the euro has also looked
quite 'cheap' in broader terms in recent weeks and still looks –
in our opinion – a relative bargain around the 1.12 area," Shaun
Osborne, chief FX strategist at Scotiabank in Toronto, said in a
note.
    Investors' appetite for riskier currencies got a boost after
Chinese data showed exports rebounded last month, helping offset
weaker imports, and reports of another reduction in Germany's
growth forecasts, analysts said.             
    Data from Europe was encouraging. Euro zone industrial
output declined by less than expected in February.             
    U.S. stocks climbed back to near record highs on Friday
after the largest U.S. bank, JPMorgan Chase & Co        ,
soothed worries that the first-quarter earnings season would
pour cold water on Wall Street's big rally back from last year's
slump.             
    "It's a party-like atmosphere for markets. Good news from
China and U.S. earnings off to an auspicious start," said Joe
Manimbo, senior market analyst at Western Union Business
Solutions in Washington.
    "This has safe-havens on their back foot, that's why the
dollar is underperforming," he said.
    Against the Japanese yen       , which tends to benefit
during geopolitical or financial stress as Japan is the world’s
biggest creditor nation, the dollar rose 0.35%.
    The Australian dollar       , which is sensitive to shifts
in risk sentiment, jumped 0.69%.
    The British pound rallied as the immediate risks around
Brexit receded after the postponement of the departure date and
as the dollar suffered a broad selloff, although collapsing
volatility signalled a reluctance to bet big. Sterling was up
0.13% at $1.3071.            
    Turkey's lira        was 0.5% weaker on the day after
plumbing three-week lows, as investor expressed disappointment
over the Turkish government's economic reform plan unveiled this
week.             

    
 (Reporting by Saqib Iqbal Ahmed; additional reporting by Tom
Finn in London; Editing by Chizu Nomiyama)
  
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