weakens as investors fret over Carney's message, yen
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[June 25, 2014] By
LONDON (Reuters) - Sterling
stayed under pressure for a second day on Wednesday, as
investors cut favorable bets on the currency after Bank
of England governor cooled expectations of an interest
rate hike later this year.
The euro was the main beneficiary of the pound's losses. The single
currency also made gains against growth-linked and less-liquid
currencies like the Australian dollar amid geopolitical concerns in
the Middle East, which have knocked down shares. The situation in
Iraq was also supporting the safe-haven yen, traders said.
Most of the attention, though, was on the pound after surprisingly
less hawkish comments from BoE Governor Mark Carney on Tuesday. The
pound fell to a one-week low of $1.6952 <GBP=D4> and pulled further
away from a 5-1/2 year peak of $1.7064 hit last Wednesday. The euro
rose to a near two-week high of 80.315 pence, before easing back a
bit to trade at 80.15.
Carney said Britain's economy still has plenty of slack to work
through and that financial markets underestimated how much
uncertainty there was in the economy.
Analysts said his comments contrasted with a speech he made earlier
this month and dented expectations for a rate rise before the end of
The resulting uncertainty about the bank's stance was driving
speculators to trim huge bets placed in sterling's favor.
"The net result in the very near term may be that from a very
overbought position technically, the pound will see a correction,
toward $1.6920 against the dollar and 81.10 for euro/sterling," said
Kit Juckes, currency analyst at Societe Generale.
DOLLAR AWAITS GDP REVISION
The dollar drifted lower against the yen with some investors
cautious ahead of the final reading of first-quarter U.S. GDP and
durable goods numbers for May. <ECONUS> The GDP data is forecast to
be revised down and could boost expectations that the Federal
Reserve is in no hurry to tighten policy.
Influential Federal Reserve policymaker, William Dudley, said on
Tuesday the U.S. central bank could reasonably wait until mid-2015
to raise interest rates without risking an undesirable rise in
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"The continued wave of dovish sentiments that are flowing from the
Fed are ensuring that the dollar retains a weakened position," said
Jane Foley, senior currency strategist at Rabobank.
"In this environment it will remain difficult for dollar/yen to make
upside progress almost irrespective of policy actions taken in
Japan. Another factor that is inhibiting the yen from softening is
the current wave of geopolitical tension."
The dollar was down 0.1 percent versus the yen at 101.90 while the
euro was flat at $1.3605. The euro was slightly lower against the
yen at 138.65 yen.
Japanese CPI will be released on Friday and any fresh signs of the
country escaping deflation are likely to further curb prospects for
additional BOJ easing.
(Additional reporting by Shinichi Saoshiro in Tokyo; Editing by
Andrew Heavens and Susan Fenton)
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