The dollar headed for a weekly advance against the euro, rebounding
from a record low on signs U.S. investment banks will withstand
credit-market losses stemming from the collapse of the
subprime-mortgage market.
The U.S. currency also rose versus the pound on speculation the U.K.
government will boost borrowing as Chancellor of the Exchequer Alistair
Darling introduces new spending guidelines. The yen was set for a
weekly loss against the South African rand as a rally in U.S. stocks
following JPMorgan Chase & Co.'s better-than-expected earnings
encouraged so-called carry trades.
``We've had a big two-day rally in financial stocks in the U.S., which
brought about a degree of stability Generally speaking there's a belief
in the market that conditions will stabilize,'' said Derek Halpenny,
head of currency research in London at Bank of Tokyo-Mitsubishi.
``That's given the impetus to the dollar against the euro.''
``Currency traders are likely to take their cue from the stock
market,'' said Masanobu Ishikawa, general manager of foreign exchange
at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker.
``Earnings season isn't as bad as many had feared. There will be some
pressure on the yen to weaken.''
Profit at JPMorgan, the largest U.S. bank by market value, fell 52
percent on mortgage-related writedowns and costs from the takeover of
Bear Stearns Cos. Second-quarter net income of 54 cents a share
compared with expectations for 44 cents in a survey of analysts.
Citigroup Inc. reports quarterly earnings later today. Wells Fargo
& Co., the second-biggest U.S. mortgage lender, on July 16
announced profit that beat analyst estimates. Merrill Lynch & Co.,
the third-biggest U.S. securities firm, fell after it yesterday
reported a fourth straight quarterly loss.
Cheaper oil is still helping to support the greenback against the euro.
Crude oil for August delivery is set for a record weekly drop in dollar
terms, having lost more than $14 a barrel since July 11 in New York.
The euro-dollar exchange rate and oil have moved in the same direction
90 percent of the time during the past year, according to calculations
based on the correlation of their value changes.
EUR/USD The rally extended further into early European dealing, touching a high at $1.5887 before easing. .
GBP/USD traded within $1,9900-$2,0000.
USD/JPY rose from Y105.90 to Y106.80.
AT 12:15 GMT ECB Council member Mario Draghi is due to speak on
"monetary policy expectations". Also today will be published at 13: 00
GMT Leading Indicators (MoM) (Jun) of Cnada.