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NEW YORK, April 18 (Reuters) - The dollar touched a
seven-week high against the yen and pulled further away from a
record low versus the euro on Friday after Citigroup surprised
investors with results that were less bleak than many had
feared.
This extended the euro's slide and helped push it down more
than a full cent against the dollar and well away from a record
high near $1.60.
Citigroup Inc <C.N>, the largest U.S. bank, posted a
quarterly loss of $5.1 billion, adding to losses in the
previous quarter, and pre-tax write-downs of $6.0 billion For
details, see [].
The figures showed financial institutions are continuing to
suffer from the credit crunch, but Citi's write-downs were
below some market expectations of up to $22 billion.
"Yen and Swiss franc are underperforming today with
equities higher in Europe and the market relieved that another
large U.S. financial institution has reported its quarterly
earnings and investors were relieved it was not uglier than it
was," said Stephen Malyon, senior currency strategist at Scotia
Capital in Toronto.
Citi's announcement drove the dollar 1.8 percent higher to
104.40 yen <JPY=>, its strongest level since late February. The
dollar index was trading at 72.400 <.DXY>.
The euro fell more than a full cent against the dollar to
trade more than 1.0 percent down on the day at $1.5718 in early
New York trading, well away from a record peak of $1.5983 hit
earlier in the week according to Reuters data.
The euro was also stung by a sharp climb in sterling on
expectations of an imminent UK plan to aid the struggling
mortgage market.
Hope that the plan may limit the extent of UK interest rate
cuts pushed euro/sterling down 1 percent percent to 79.08 pence
<EURGBP=>, away from this week's record high at 80.98 pence.
Sterling also rose 0.2 percent to $1.9941 <GBP=>, just down
from a two-week high touched in earlier trading.
EURO CONSOLIDATES
The euro has jumped 8 percent to the dollar this year on
the view that European interest rates will stay put until later
this year, while the U.S. Federal Reserve is expected to cut
rates further from the current 2.25 percent.
This would help to keep euro zone rates significantly
higher than U.S. ones, keeping the euro's yield appeal intact.
Still, given the euro's ferocious gains in the past few
months -- the euro sailed through $1.50 only two months ago --
analysts said the market was taking a breather ahead of $1.60.
"The move from $1.50 to $1.59 has been almost unrelenting
so a consolidation is warranted in the short term," said
Stephen Koukoulas, global strategist at TD Securities.
But he added that a push through $1.60 was only a matter of
time, a view shared by many in the market.
Market participants said that euro selling would likely be
short-lived, as ongoing inflation pressures will prompt the ECB
to hold rates at 4 percent at least through autumn.
The inflation argument was bolstered by figures showing
German producer prices in March increased 0.7 percent
month-on-month and 4.2 percent for the year, above
expectations. Earlier this week, euro zone inflation hit a
record high.
"The main driver is interest rate differentials and it
looks as though the ECB won't cut in the first half of the
year," said Kikuko Takeda, senior currency economist at
BTM-UFJ.
Analysts said that while U.S. bank earnings this quarter
have not been as dreary as some had been expecting, figures
showed that the credit crisis is far from over, which many
believed would keep the U.S. currency under selling pressure.
(Reporting by Nick Olivari in New York and Naomi Tajitsu in
London; Editing by Tom Hals)
