FOREX-Dollar weakens broadly as Fed trumps G20

* G20 vows to refrain from competitive devaluations

* Market awaits further clues on possible Fed easing

* Yen at 15-yr high; euro gains seen capped by options
(Updates prices, adds detail)

By Steven C. Johnson

NEW YORK, Oct 25 (BestGrowthStock) – The dollar fell broadly on
Monday as traders braced for the U.S. central bank to turn on
the printing press again next week even as the G20 pledged to
shun competitive currency devaluation.

The Federal Reserve is expected to launch a second round of
asset purchases at its Nov. 2-3 meeting, a process intended to
push U.S. interest rates even lower and one that would make the
dollar less attractive than higher-yielding currencies.

That drove the greenback to a 15-year low against the yen
and weakened it against most other major currencies, including
the euro and Australian dollar.

Speculation that G20 finance leaders would strike a truce
on exchange rate disputes at a weekend meeting and perhaps set
targets for reducing trade imbalances provided a dollar respite
last week, but analysts said the lack of a concrete agreement
was a green light to sell the dollar ahead of Fed easing.

While U.S. Treasury Secretary Timothy Geithner reiterated
at the G20 meeting that the United States supports a strong
dollar, analysts expect more dollar weakness ahead.

“It is one thing for the Treasury to say that, but then the
Fed holds all the ammunition and when it is set to print more
money, the dollar will remain a weakened currency,” said Jane
Foley, senior currency strategist at Rabobank.

BNY Mellon strategist Michael Woolfolk said Fed policy “is
on railroad tracks right now and heading in one direction”
toward more easing.

For more on the G20 meeting, see [ID:nTOE69M004]
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ G20 PDF file at For an FX column on the Fed, click on [ID:nLDE69L1EY] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>


The dollar fell to 80.41 yen on trading platform EBS, a
15-year low and within reach of a 79.75 record low. Japan
intervened to little avail last month to slow the yen’s gains,
and traders said chances of more official yen selling would
increase if the dollar falls below 80 yen. It was last down 0.7
percent at 80.78 yen (JPY=EBS: ).

The euro rose 0.1 percent to $1.3965 (EUR=: ). Earlier it hit
$1.4080 after breaking through resistance at $1.4051, but pared
gains after data showed sales of previously owned U.S. homes
rose a surprising 10 percent last month. [ID:nN25264142]

Traders said the euro may target its recent 8-1/2-month
high around $1.4161 this week but said the presence of some
large option barriers, including one at $1.4215 set to expire
on Wednesday, could slow further gains.

That could lead to stronger-than-usual defense of that
level, with the barrier payout said to be 30 million euros.
More typical option payouts are in the 3-5 million euro range.

One trader said real money accounts and trend-following
commodity trading advisers were seen buying the euro and the
Australian dollar, while another cited buying of the euro and
the Australian dollar by Asian accounts.

The Australian dollar rose 0.8 percent to $0.9904 (AUD=D4: ),
boosted by news that Singapore Exchange (SGXL.SI: ) will buy
Australian bourse operator ASX (ASX.AX: ) and expectations of a
rate hike early next month. [ID:nSGE69N02J].

In a Reuters poll earlier this month, U.S. primary dealers
projected the size of quantitative easing in a range of $500
billion to $1.5 trillion [FED/R].

Analysts said that has made it tough to make too much of
G20 announcements and agreements on currencies.

Even German Economy Minister Rainer Bruederle took issue on
Saturday with what he called a U.S. policy of increasing
liquidity, saying it indirectly manipulated exchange rates.

Some investors said there could be some movement toward
more flexible exchange rates in the longer term.

Vasileios Gkionakis, macro strategist at Fulcrum Asset
Management LLP in London, said the G20 meeting statement “was a
touch better” than what people had expected “because at the end
of the day, it’s the first time that we’ve got a joint stance
as far as FX is concerned.

“From that point of view,” he added, “it does provide some
tailwinds for gradual appreciation of emerging market
currencies against the U.S. dollar.”

Gkionakis said a strong growth outlook should continue to
boost Asian currencies, with the Singapore dollar, Taiwanese
dollar and Korean won all set to benefit.

Fulcrum oversees about $900 million in assets.
(Additional reporting by Wanfeng Zhou in New York and Anirban
Nag in London)
(Reporting by Steven C. Johnson and Nick Olivari; Editing by
Dan Grebler)

FOREX-Dollar weakens broadly as Fed trumps G20