DOLLARS RISE AND FALL

The dollar rose against rival currencies Monday as investors continue to view the U.S. currency as a safer alternative to more risky assets despite the nation's weak economy.

"We're still seeing a lot of nervousness in the market," said Kathy Lien, director of currency research at Global Forex Trading. "And that's why the dollar is still being bid against other currencies."

Even as the U.S. economy slips deeper into recession, the dollar has managed to maintain its reputation as a safe-haven. As a result, the U.S. currency often rallies when the economic outlook darkens and stock prices fall.

Stocks tumbled in afternoon trade, after an early rally fizzled, as concerns about the economy outweighed news of a $41 billion corporate merger.

The pound fell 2% against the dollar to $1.3816 after the U.K. government took a big stake in Lloyds Banking Group. The euro was down 0.15% versus the dollar to $1.2633.

British regulators struck a deal with Lloyds over the weekend to cap the bank's losses on risky assets at $370 billion. In exchange, the government could take as much as a 77% stake in the troubled bank.

0:00 /1:05UK to increase stake in Lloyds

That news highlighted concerns that the U.S. government could follow a similar path in dealing with troubled financial institutions in America, Lien said.

"A lot more uncertainty lies ahead for U.S. banking sector," she said. "U.S. fundamentals will only come back to forefront when the fear of a major U.S. bank failure evaporates."

Meanwhile, the dollar was up 0.5% versus the yen at ¥98.84, after Japan recorded its first trade deficit in 13 years.

0:00 /0:58Japanese exports plummet 46%

The deficit came as demand for Japan's exports dried up amid the global economic slowdown and a stronger yen undermined profits earned overseas.

The yen's retreat, however, suggests that Japan's currency, which is also considered a safe-haven, is becoming more closely connected with the deterioration in nation's economy.

"The yen is decoupling from risk aversion," said Gareth Sylvester, senior currency strategist at currency brokerage HiFx in San Francisco.

However, even as the yen begins to reflect the downturn in Japan's economy, the dollar is expected to remain strong as investors shun risk, Sylvester said.

"The predominant theme remains risk aversion and dollar strength," Sylvester said. "That correlation is still strong."

DOLLARS FALLS

The dollar weakened broadly Wednesday as investors felt more comfortable buying risky assets such as stocks, modestly dampening the greenback's safe-haven appeal.

European shares rose, with banks leading the way as U.S. stocks edged up, although gains were pared as hopes faded for new details on a government plan to shore up the banking system.

"U.S. stocks are doing better today and we're seeing the euro getting some bids, although equities are a little disappointing considering where stock futures were at the open," said Steven Butler, director of currency trading at Scotia Capital in Toronto.

Gains in emerging market currencies such as the Hungarian forint and Polish zloty versus the dollar also weighed on the U.S. currency, analysts said.

The dollar extended losses against the euro in late afternoon trading, with the euro hitting a session high of $1.2859, its highest since Feb. 25.

The euro was last up 1.2% against the dollar at $1.2836 as investors bet the dollar's gains in 2009 were too far, too fast without some new driver to send it higher.

0:00 /3:20Inflation risk for retirees

John Crooks, president of research firm Black Swan Capital in Florida, said he thinks the euro bounce could have some legs.
Apart from the rally in stocks, he said, the euro was being supported by two other factors: "bond prices under pressure and oil back in the mid-40s despite no real sign that global demand has picked up."

The dollar was also down 1.4% against the yen at ¥97.28.

Some analysts said the euro's gains could be limited as markets got a timely reminder of the sickly state of global economic growth after data earlier in the global session showed a slump in economic powerhouse China's exports in February.

0:00 /1:04Chinese exports decline

"The dramatic deterioration in China's trade balance suggests that caution remains recommended and a lasting reversal in the dollar trend is unlikely,' said Commerzbank in a research note.

Boris Schlossberg, GFT's director of FX research, said the Chinese trade report cast doubts on China's ability to finance the U.S. current account deficit and in the long run could weigh on the dollar.

"The concern is that maybe China will not be able to generate massive amounts of foreign exchange capital which can then be recycled to U.S. Treasury securities. That is the big fear factor that hangs over the dollar."

Sterling, meanwhile, stayed under pressure against the single European currency, which rose to six-week highs above 93 pence, as Britain officially started its quantitative easing program to boost money supply.

The pound hit a six-week low against the dollar at $1.3656. It last traded at $1.3867, up 0.8% on the day. The euro was up 0.3% versus sterling at 92.52 pence. READ MORE..

NEW FOREX UPDATES

NEW YORK (Reuters) -- The U.S. dollar and euro jumped against the Swiss franc Thursday after the Swiss National Bank said it was intervening in the foreign exchange market as it faced the growing risk of deflation.

The Swiss central bank said it was implementing its decision to buy foreign currencies. The SNB also cut interest rates on Thursday by a quarter percentage point to a historic low, offering three-, six- and 12-month funds at 0.05%.

The SNB, which last intervened in August 1995, further said it will buy not only foreign currencies but bonds as well. Switzerland is facing its worst recession in over three decades.

A "very, very strong statement from the Swiss National Bank about what they are doing and about to do," said Karthik Sankaran, Portfolio Manager and Principal at Covepoint Capital Advisors LLC In New York. "They are the first central bank that is actually using the purchase of foreign currency as a means of quantitative easing."

In late afternoon New York trading, the dollar rose 2.96% to 1.1876 Swiss francs, on track for its biggest one-day gain since August 1995, at current prices. It rose as high as 1.1965 francs, a three-month high, according to Reuters data.

The Swiss franc is one of the world's most traded currencies, at times prized as a safe haven for investors.

The euro climbed to 1.5302 Swiss francs, the highest since December. It last traded at 1.5234, up 2.9%, the euro's best day ever against the Swiss currency.

SNB's move to zero rates and quantitative easing was expected, traders said, but the immediate move to intervene was a surprise.

Bank of New York-Mellon senior currency strategist Michael Woolfolk said "the way this was communicated was intended at maximizing its shock value." He said there were no hints from SNB officials ahead of time that intervention would be immediate.

"They changed their economic outlook, they not only lowered interest rates to effectively zero but also announced quantitative easing and currency intervention. This was the full monty," Woolfolk said.

Poland, Hungary benefit

Quantitative easing has been deployed by central banks in countries including Britain, where the central bank is buying assets with newly created money.

Marc Chandler, global head of FX strategy at Brown Brothers Harriman in New York, said the SNB intervention should ease pressure on Poland and Hungary, two European emerging market countries seriously hit by the global credit crisis.

These two countries had taken advantage of ultra-low Swiss interest rates, borrowing heavily in Swiss francs and investing in riskier assets.

"The strength of the Swiss franc compounded their woes. Today's dramatic weakening of the Swiss franc may ease this pressure," said Chandler.

Gains in the dollar versus the Swiss franc boosted the greenback against other major currencies such as the euro and sterling.

The euro fell 0.1% to $1.2871. The euro zone single currency was also pressured by comments from European Central Bank President Jean-Claude Trichet that euro zone interest rates could be cut further.

The ECB cut its benchmark rate to a record low 1.5% last week and economists expect it to cut to 1.0%, most likely in April.

Sterling rose 0.1% to $1.3867.

The SNB news overshadowed all other events and data in the market including U.S. retail sales numbers that were better than expected and weekly jobless claims data that were not far from analysts' forecasts.

Against the yen, the dollar erased early losses, partly because of firmer U.S. stocks, still one of the key drivers in the currency market. Stocks were lifted by energy shares and the U.S. retail sales report. The dollar rose 0.6% to 97. READ MORE..

NEW FOREX UPDATES

NEW YORK (Reuters) -- The U.S. dollar and euro jumped against the Swiss franc Thursday after the Swiss National Bank said it was intervening in the foreign exchange market as it faced the growing risk of deflation.

The Swiss central bank said it was implementing its decision to buy foreign currencies. The SNB also cut interest rates on Thursday by a quarter percentage point to a historic low, offering three-, six- and 12-month funds at 0.05%.

The SNB, which last intervened in August 1995, further said it will buy not only foreign currencies but bonds as well. Switzerland is facing its worst recession in over three decades.

A "very, very strong statement from the Swiss National Bank about what they are doing and about to do," said Karthik Sankaran, Portfolio Manager and Principal at Covepoint Capital Advisors LLC In New York. "They are the first central bank that is actually using the purchase of foreign currency as a means of quantitative easing."

In late afternoon New York trading, the dollar rose 2.96% to 1.1876 Swiss francs, on track for
its biggest one-day gain since August 1995, at current prices. It rose as high as 1.1965 francs, a three-month high, according to Reuters data.

The Swiss franc is one of the world's most traded currencies, at times prized as a safe haven for investors.

The euro climbed to 1.5302 Swiss francs, the highest since December. It last traded at 1.5234, up 2.9%, the euro's best day ever against the Swiss currency.

SNB's move to zero rates and quantitative easing was expected, traders said, but the immediate move to intervene was a surprise.

Bank of
New York-Mellon senior currency strategist Michael Woolfolk said "the way this was communicated was intended at maximizing its shock value." He said there were no hints from SNB officials ahead of time that intervention would be immediate.

"They changed their economic outlook, they not only lowered interest rates to effectively zero but also announced quantitative easing and currency intervention. This was the full monty," Woolfolk said.

Poland, Hungary benefit

Quantitative easing has been deployed by central banks in countries including Britain, where the central bank is buying assets with newly created money.

Marc Chandler, global head of FX strategy at Brown Brothers Harriman in New York, said the SNB intervention should ease pressure on Poland and Hungary, two European emerging market countries seriously hit by the global credit crisis.

These two countries had taken advantage of ultra-low Swiss interest rates, borrowing heavily in Swiss francs and investing in riskier assets.

"The strength of the Swiss franc compounded their woes. Today's dramatic weakening of the Swiss franc may ease this pressure," said Chandler.

Gains in the dollar versus the Swiss franc boosted the greenback against other major currencies such as the euro and sterling.

The euro fell 0.1% to $1.2871. The euro zone single currency was also pressured by comments from European Central Bank President Jean-Claude Trichet that euro zone interest rates could be cut further.

The ECB cut its benchmark rate to a record low 1.5% last week and economists expect it to cut to 1.0%, most likely in April.

Sterling rose 0.1% to $1.3867.

The SNB news overshadowed all other events and data in the market including U.S. retail sales numbers that were better than expected and weekly jobless claims data that were not far from analysts' forecasts.

Against the yen, the dollar erased early losses, partly because of firmer U.S. stocks, still one of the key drivers in the currency market. Stocks were lifted by energy shares and the U.S. retail sales report. The dollar rose 0.6% to 97. READ MORE..