Citigroup support the dollar

 

By Rodian Rahnayev

Finotec Analysis Team

28 November 2007

 

 

Â	EUR/USD	USD/JPY	GBP/USD	USD/CHF
Resistance	1.5010 1.5000 1.4965	110.50 110.00 109.15	2.0805 2.0765 2.0735	1.1115 1.1090 1.1070
Support	1.4805 1.4775 1.4690	108.40 107.55 107.20	2.0640 2.0600 2.0585	1.1000 1.0955 1.0890

U.S dollar took back the losses and straightened against the major currencies after yesterday news that Citigroup Inc. would sell a $7.5 billion stake to the Abu Dhabi government triggered a wave of buying from traders that rely on computer models. That news restored confidence in battered U.S. banks, fueling a steep rally in the stock market.

The euro fell 0.3 percent to $1.4832, more than a cent below last week’s record highs at $1.4966. The euro zone common currency traded in a seesaw fashion after a strong reading of Germany‘s Ifo corporate sentiment survey. German Finance Minister Peer Steinbrueck said on Tuesday he expected the economic upturn in the euro zone’s largest economy to continue in 2008 despite the strong euro.

The dollar rose sharply against the yen in the Tokyo session after the Citi report, sparking the unwinding of short positions on the greenback, and that rally spilled over to other currencies, traders said.

Investors interpreted Citi’s move as a sign financial institutions were repairing the damage from a meltdown in the U.S. sub prime mortgage market and the resulting credit crunch, which has been a big factor behind recent dollar weakness.

The dollar pulled away from a 2-1/2-year low against the yen touched on Monday to trade at 109.15, on track for its biggest one day gain since late August. The yen fell broadly as news of the Citi stake sale prompted a recovery in the Nikkei share index, warming demand for relatively riskier assets. However, it is too early to think that the dollar recovers and change direction up.

Today, Investors will be focused on the Core Durable Goods Orders m/m data that will be released at 13:30 GMT and Existing Home Sales at 15:00 GMT.