FOREX-Dollar snaps five-week losing streak

* Dollar index heads for first weekly gain since mid-Sept

* Euro struggles at resistance $1.40

* FX Concepts see euro topping out between $1.43-$1.45

* Geithner urges G20 not to use FX for economic advantage
(Updates prices, adds detail, comment, changes byline)

By Wanfeng Zhou

NEW YORK, Oct 22 (BestGrowthStock) – The dollar was on track on
Friday to snap a five-week losing streak against major
currencies on uncertainty ahead of the outcome of a meeting of
global finance ministers and as the euro repeatedly ran into
resistance above $1.40.

Extreme bets against the greenback also prompted investors
to moderate their dollar selling. The dollar (.DXY: ) has lost
some 7 percent against a basket of major currencies during a
five-week swoon. It was up 0.6 percent this week, on pace for
its first weekly gain since mid-September.

Finance and central bank chiefs from the Group of 20 rich
and emerging nations meet on Friday and Saturday in South
Korea, and a G20 source said officials were unlikely to reach
an accord rejecting currency devaluations and capping current
account balances, after U.S. proposals ran into stiff
opposition. See [ID:nLDE69L0JA]

Analysts said once the G20 meeting is out of the way, the
dollar still will fight an uphill battle, with the Federal
Reserve widely expected to announce more monetary easing next
month, likely through direct purchases of U.S. Treasury debt.

“Once we get past the G20 event, we’re going to have that
renewed focus on what’s going on with the U.S. quantitative
easing and another down leg in the U.S. dollar,” said David
Watt, senior currency strategist at RBC Capital Markets in
Toronto. “There’s the possibility of a renewed upswing in the

The euro (EUR=: ) was last little changed at $1.3931, off a
session peak of $1.3973, according to trading platform EBS. The
euro is up 9 percent against the dollar since September, though
it has failed to hold ground for long on several occasions
above $1.40.

Analysts said a failure to reach agreement would free
traders to keep selling dollars in favor of the euro, emerging
market and commodity-linked currencies, such as the Australian

“A new currency accord will be hard to achieve in principle
and even harder to push through in practice over the hurdles of
domestic political pragmatism,” said Lena Komileva, head of G7
market economics at Tullett Prebon.

The dollar was up 0.1 percent at 81.45 yen (JPY=: ), not far
from a 15-year low.


Interest rate spreads have continued to move in favor of
the euro in recent days, with U.S. yields falling as yields on
German government debt rise. The move was driven in part by
expectations that euro-zone countries are planning to tighten
policies, even as the Fed is set to ease further.

Some traders said the euro will likely stay in its recent
range of between $1.3650 and $1.4150 in the near term as
investors wrestle with uncertainty over the size of expected
U.S. monetary easing program.

But eventually growth differentials may shift in the
dollar’s favor if Fed policy perks up the economy in early
2011, just as euro-zone governments begin to slash spending and
raise taxes to get public spending in order.

“Once austerity measures take effect in Europe, the economy
may contract relative to the U.S., a headwind for the euro,”
said Mark McCormick, strategist at Brown Brothers Harriman in
New York.

McCormick said the euro’s five-day and 20-day moving
averages against the dollar are converging, a bearish
short-term sign. Traders also said a weekly close below
$1.3929, the euro’s 200-week moving average, would signal
dollar gains.

John Taylor, chief investment officer of FX Concepts,
expects the euro to peak between $1.43 and $1.45 and says it
could sink to parity with the dollar in 2011. [ID:nN22169755]

“I just don’t see all this bullishness on the euro. I don’t
think talk about exit strategies from the (European Central
Bank) is right,” said Taylor, who oversees the world’s largest
currency hedge fund with about $8.5 billion under management.
(Additional reporting by Gertrude Chavez-Dreyfuss and Steven
C. Johnson; Editing by Padraic Cassidy)

FOREX-Dollar snaps five-week losing streak