(Recasts, adds comments, changes byline and dateline, previous
LONDON)
By Vivianne Rodrigues
NEW YORK, April 21 (Reuters) - The dollar fell broadly on
Monday after weaker-than-expected Bank of America profits
damped investors' initial optimism that companies may escape
the pinch of the crisis in global credit markets.
Bank of America Corp <BAC.N>, the No. 2 U.S. bank, reported
a fall in its first-quarter profit due to write-downs and
rising credit losses. Its net income fell to $1.21 billion, or
23 cents per share. For details, see [].
Analysts said BoA's results suggested that the fallout from
the credit crisis may not not be over as some have speculated,
chilling risk appetite as such problems were expected to
continue weighing on the U.S. economy and the dollar.
In Europe, hawkish European Central Bank inflation rhetoric
supported the euro after Governing Council member Klaus
Liebscher said there was no reason for pessimism on euro zone
growth. []
"Bank of America's results obviously don't help the dollar,
but the comments by the ECB earlier today were very hawkish and
it clearly indicates the bank is very concerned about inflation
and will avoid cutting rates," said Matthew Strauss, a senior
currency strategist at RBC Capital Markets in Toronto.
In morning trading in New York, the euro was 0.8 percent
higher at $1.5939 <EUR=>, inching toward a record high of
$1.5983 hit last week, according to Reuters data.
The single European currency was supported by a growing
view that the ECB is in no hurry to cut interest rates from 4.0
percent for now due to nagging inflation risks.
The U.S. currency also came under selling pressure as
investors continued to fret about the inflationary effect of
oil prices, which hit a record high of $117.40 a barrel.
The greenback slipped 0.6 percent to a session low of
102.99 yen <JPY=> and it fell more than 0.5 percent against a
basket of six major currencies to 71.554 <.DXY>.
Results on Friday from Citigroup <C.N>, the largest U.S.
bank, showed less damage from the credit market crisis than
some had expected, with write-downs of $6 billion contrasting
with market rumors of write-downs approaching $22 billion.
This had sparked dollar buying late last week as some
speculated that the worst of the credit crunch may have
passed.
But having seen several "false dawns" in the credit crisis,
investors were reluctant to place too much faith in the banking
results as marking the beginning of the end for the squeeze.
Sterling also fell, with markets unimpressed by a Bank of
England offer to swap government bonds worth 50 billion pounds
for banks' riskier mortgage debt to help them navigate through
the credit squeeze, as the amount was known before the
announcement.
Despite a tentative pickup in risk appetite from last
week's banking results and Royal Bank of Scotland <RBS.L>,
Britain's second-biggest bank, confirming it is considering a
rights issue, UK markets had been on tenterhooks over the BoE
plan to help ease strains in British mortgage markets.
The pound extended losses in reaction to the news, pushing
the euro up 1.2 percent to 80.16 pence <EURGBP=>, not far from
a record high near 81 pence hit last week. The UK currency fell
0.5 percent to $1.9873 <GBP=>.
"The plan didn't offer any massive surprises. ... Sterling
has had a good run over the last few days on the news and so
it's a bit of the 'buy the rumor, sell the fact,'" said Daragh
Maher, senior currency strategist at Calyon.
(Additional reporting by Naomi Tajitsu; Editing by Jonathan
Oatis)
