By Chikako Mogi
TOKYO, April 10 (Reuters) - The dollar fell broadly on
Thursday as the market focused on interest rate differences, with
the European Central Bank meeting later in the day and likely to
keep rates steady.
The dollar has lost its yield advantage due to sharp rate
cuts by the Federal Reserve, which is widely expected to lower
rates further at its April 29-30 meeting, widening the gap with
the ECB's 4 percent policy rate. []
A rise in oil prices <CLc1> to a record high on Wednesday and
falling stock prices also weighed on the dollar. [] []
Traders said the dollar's weakness may also be partly related
to a CNBC report on Wednesday citing sources that Merrill Lynch &
Co <MER.N> executives expect the company to record first-quarter
write-downs of $6 billion to $6.5 billion and will likely post a
quarterly loss. []
"What we want from financial institutions is specific steps
to boost capital to bring their balance sheets back to health,"
said a senior dealer at a European bank.
Trading was largely driven by speculative players seeking to
hit technical levels, while investors' appetite for risk-taking
remained tepid, traders said.
The dollar fell 0.8 percent to 100.99 yen <JPY=>. It dropped
to as low as 100.85 yen on electronic trading platform EBS, down
more than one yen from the day's high of 101.90 yen.
The dollar has reversed course after rising to 102.84 yen on
Wednesday, near a one-month high of 102.95 yen hit last week.
The euro rose 0.1 percent to $1.5840 <EUR=>, with traders
saying the currency could soon rise above a record high of
$1.5905 hit last month.
Against the yen, the euro fell 0.7 percent to 159.97 yen
<EURJPY=R>, retreating from a three-month high of 161.75 yen hit
on Tuesday.
In a sign of its broad weakness, the dollar fell against a
trade-weighted basket of major currencies, with the dollar index
falling 0.2 percent to 71.690 <.DXY>.
Traders said weakness in some Asian stock markets spurred an
unwinding of risky carry trades and pushed the yen up against
higher-yielding currencies. Tokyo's benchmark Nikkei share
average fell 1.2 percent <>.
SINGAPORE TIGHTENS POLICY
The dollar's fall against the yen gained steam after
Singapore's central bank tightened monetary policy on Thursday in
a surprise move, saying it will allow a faster appreciation of
the Singapore dollar. []
The Monetary Authority of Singapore conducts policy through
the exchange rate, steering the Singapore dollar within a secret
trade-weighted band against a basket of currencies, rather than
by adjusting interest rates.
The policy tightening caused the Singapore dollar <SGD=> to
climb to a record high against the U.S. dollar, and helped spark
the U.S. dollar's slide against the yen, traders said.
Speculative moves will likely dominate the market ahead of
Friday's meeting in Washington of the Group of Seven nations'
finance ministers and central bankers, traders said.
Traders said they don't expect surprises from the G7 meeting
on currencies, but were wary of the risk that officials might
note volatility in currencies, particularly the euro.
"The market is focusing on interest rates, as seen clearly in
sterling selling, and barring any G7 surprises, the euro has the
most upside," said a senior dealer at a Japanese trading house.
"While technical factors are driving the market, one thing is
clear: It's safest to bet on the euro. The market wants to push
the euro to a new peak," he said.
Sterling slumped to a record low against the euro on market
expectations for a narrowing in yield differentials, with the
Bank of England expected to cut interest rates by a quarter-point
to 5 percent at a policy meeting on Thursday. []
(Additional reporting by Masayuki Kitano; Editing by Hugh
Lawson)
