(Updates prices, adds quotes, ECB comment, byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, April 18 (Reuters) - The dollar rose to a
seven-week peak against the yen and moved further away from a
record low versus the euro on Friday after Citigroup earnings
sparked hope the credit crisis may be nearing an end.
Problems in the U.S. financial sector have been triggered
by weakness in the housing market and some analysts see further
falls to come, but Citigroup's earnings temporarily eased those
fears and increased risk appetite, making the dollar more
attractive.
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
[]. But shares in the company rose as investors
were appeased by efforts being made to get past credit problems
and drive down costs.
"There's a prevailing sentiment that we're getting past the
worst and it's a sentiment that is growing and driving some
improvement in the dollar," said Nick Bennenbroek, head of FX
strategy at Wells Fargo in New York.
In midday trading, the dollar rose nearly 2 percent against
the yen to 104.47 yen <JPY=>, earlier reaching its strongest
level since late February at 104.64 yen. Against the
low-yielding Swiss franc, the dollar rose to a roughly
five-week high at 1.0283 francs <CHF=> and last traded at
1.0242, up 1.7 percent from late on Thursday.
The dollar index was trading at 72.256 <.DXY>, up 0.9
percent.
The euro fell as much as 2 cents against the dollar from
its daily peak. It last traded down more than 0.9 percent on
the day at $1.5747 in midday 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 more than 1
percent to 78.99 pence <EURGBP=>.
The euro, however, got a brief boost on remarks by European
Central Bank Governing Council member Klaus Liebscher.
In an exclusive interview with Reuters, Liebscher said no
room exists to cut euro zone interest rates, adding that he is
not ruling out tightening in the region. For the interview,
click on [].
The euro has jumped 8 percent to the dollar so far this
year on the view European interest rates will stay put until
later this year, while the U.S. Federal Reserve is seen as
cutting rates further from the current 2.25 percent.
Further U.S. cuts would help to keep euro zone rates
significantly above rates in the United States, 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.
Some market participants said 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.
But Deutsche Bank strategist Binky Chadha said in a
research note he sees "more appreciable slowing" in the euro
zone from the second quarter and beyond as the impact of the
global credit crisis takes hold. Chadha says the dollar would
find a bottom in the first half of 2008 and the euro would turn
lower in the second half this year.
But analysts cautioned 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.
(Additional reporting by Nick Olivari; Editing by Leslie
Adler)
