FOREX-Dollar rises as Fed meets; emerging markets recover on rate hikes

Wed, 29 Jan - 6:24am
    * Dollar rises further, holds above seven-week low vs yen 
    * Indian rupee, Turkish lira rebound as sell-off pauses 
    * Turkish central bank stems tide by calling emergency 
meeting 
    * Fed meeting may be next trigger for emerging markets 
worries 
 
 (Updates market action, adds S&P lowers outlook on Ukraine) 
    By Richard Leong 
    NEW YORK, Jan 28 (Reuters) - The dollar rose modestly 
against the yen and euro on Tuesday as investors stepped back 
into stocks and emerging markets whose recent sell-off had 
driven money into safe-haven currencies. 
    The greenback might receive another boost if the Federal 
Reserve were to further pare its bond-purchase stimulus despite 
data suggesting the U.S. economy lost some momentum at the end 
of 2013, analysts said. 
    U.S. central bank officials began a two-day policy meeting 
on Tuesday, at which analysts expect the Fed to decide to reduce 
its monthly bond purchases in February by $10 billion to $65 
billion.  
    Such a move is perceived as positive for the dollar since it 
would reduce the amount of cash the Fed injects into the banking 
system, although the Fed's tapering which began in December has 
hurt emerging market currencies because the dollars created had 
flooded into fast-growing nations in Asia, Africa and Latin 
America.  
    "The Fed is squarely focused on the domestic economy. It 
will continue to taper," said Russ Koesterich, global chief 
investment strategist at BlackRock in San Francisco, which 
manages $4.1 trillion. 
    "The volatility in emerging markets is not over. It will be 
with us for some time. There are still structural problems with 
some of these markets," Koesterich added. 
    Citing political instability, Standard & Poor's lowered its 
outlook on Ukraine to negative from stable and slashed its 
credit rating deeper into junk territory.    
    The central banks of some key emerging economies sought to 
soothe investor concerns. 
    The Indian rupee    booked its biggest rise in more than 
two months after the Reserve Bank of India surprised with an 
interest rate hike on Tuesday.    
    Later Tuesday, Turkey's central bank is expected to raise 
its lending rate to about 10 percent at an emergency meeting in 
a bid to halt the slide of its currency   .    
    The rupee improved 0.9 percent against the dollar at 62.56 
rupees per dollar, while the Turkish lira gained about 1.3 
percent to 2.25 to the dollar.    
    The recovery in emerging market currencies helped lift 
global stock prices, with the MSCI world index    
gaining 0.4 percent, snapping a three-session run of heavy 
losses.  MKTS/GLOB  
    The dollar in the meantime held steady against the euro and 
recovered further against the yen in the wake of a much 
weaker-than-expected reading on U.S. durable goods orders in 
December. 
    The dollar    rose 0.3 percent against the yen at 102.84 
yen after hitting a seven-week low last Friday.  
    The euro    dipped 0.06 percent against the greenback at 
$1.3661, retreating from an approximately 3-1/2-week high set 
last Friday. 
   <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 
    Graphics: 
    Emerging market currencies  http://link.reuters.com/jus35t 
    U.S. durable goods          http://link.reuters.com/baf65v 
    U.S. consumer confidence    http://link.reuters.com/pum34t 
    U.S. home prices            http://link.reuters.com/rem34t 
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> 
        
    The durable goods data were mitigated by a 
stronger-than-expected January pickup in U.S. consumer 
confidence and in-line growth in U.S. home prices in November. 
   
    The surprise December drop in durable goods orders raised 
some doubts over whether the Fed tapered its third round of 
quantitative easing too soon. 
    "They began tapering not because they saw the economy on a 
firmer footing but rather because they were concerned with the 
rapid rise in the Fed's balance sheet with little to show for it 
in economic strength," said Douglas Borthwick, managing director 
at Chapdelaine Foreign Exchange in New York. 
    "The markets, especially emerging markets, are taking the 
view that tapering is as good as ending or reversing QE," 
Borthwick said. 
    As investors await the Fed's next move, they dipped their 
toes back into stocks and commodity-linked currencies such as 
the Australian dollar.  
    Worries over how the Australian economy will hold up in the 
face of slackening commodity markets and a slowdown in China 
were eased somewhat by the NAB measure of business conditions, 
which jumped to its highest in more than 2-1/2 years. 
   
    The Aussie dollar rose to $0.8770   , up 0.35 percent 
on the day after climbing as high as $0.8821 earlier in the 
European session, pulling away from Friday's low of $0.8660, its 
lowest level since July 2010. 
 
 (Additional reporting by Steven C. Johnson in New York and 
Patrick Graham in London; Editing by Andrew Hay and James 
Dalgleish) 
 ((richard.leong@thomsonreuters.com)(+1 646 303 6313)(Reuters 
Messaging: 
richard.leong.thomsonreuters.com@thomsonreuters.net)(Twitter 
@RichardLeong2)) 
  
((     
    Currency bid prices at 03:08PM (2008 GMT) 
Description    RIC    Last    U.S. Close 
 Previous  
 Session    Pct Change    YTD Pct 
 Change    High Bid    Low Bid 
Euro/Dollar    EUR=    $1.3661    $1.3670    -0.07%    -0.61%    +1.3688    +1.3630 
Dollar/Yen    JPY=    102.8300    102.5400    +0.28%    -2.21%    +103.2500    +102.4900 
Euro/Yen    EURJPY=    140.53    140.20    +0.24%    -3.16%    +140.9800    +140.1800 
Dollar/Swiss    CHF=    0.8979    0.8962    +0.19%    +0.57%    +0.9010    +0.8955 
Sterling/Dollar    GBP=    1.6575    1.6584    -0.05%    +0.11%    +1.6624    +1.6537 
Dollar/Canadian    CAD=    1.1155    1.1113    +0.38%    +5.04%    +1.1177    +1.1078 
Australian/Dollar    AUD=    0.8770    0.8735    +0.40%    -1.60%    +0.8820    +0.8727 
Euro/Swiss    EURCHF=    1.2268    1.2255    +0.11%    -0.02%    +1.2283    +1.2251 
Euro/Sterling    EURGBP=     0.8242    0.8248    -0.07%    -0.66%    +0.8251    +0.8217 
NZ Dollar/Dolar    NZD=    0.8262    0.8229    +0.40%    +0.68%    +0.8304    +0.8221 
Dollar/Norway    NOK=    6.1299    6.1458    -0.26%    +1.05%    +6.1630    +6.1310 
Euro/Norway    EURNOK=    8.3740    8.4054    -0.37%    +0.42%    +8.4269    +8.3736 
Dollar/Sweden    SEK=    6.4210    6.4189    -0.06%    -0.02%    +6.4679    +6.4098 
Euro/Sweden    EURSEK=    8.7730    8.7781    -0.06%    -1.05%    +8.8224    +8.7578 
     
     
All spots FX=  
Tokyo spots AFX=  
Europe spots EFX=  
Volatilities FXVOL=  
Tokyo Forex market info from BOJ TKYFX World central bank news CEN 
Economic Forecasts... ECON   Official rates...INT/RATE 
Forex Diary.......MI/DIARY   Top events........M/DIARY 
Diaries...........DIARY Diaries Index........IND/DIARY 
Press Digests.....PRESS Polls on G7 economies..SURVEY/ 
European markets......MARKETS/)))) 
 
Keywords: MARKETS FOREX/  
     
URN: 
urn:newsml:reuters.com:20140128:nL2N0L21EF:4
Topics: 
JP US IN AU EUROP SEEU MEAST TR MKTREP FRX EZ ASIA EMRG MTGFX REP EUR LEN RTRS WEU EUROPE AMERS

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