Occhio
GLOBAL MARKETS-Yen up on China FX move, shares up as Rita eases
Fri Sep 23, 2005 06:53 AM ET
By Anshuman Daga
LONDON, Sept 23 (Reuters) - The yen rose against the dollar and the euro on Friday after
China's central bank widened the trading band for the yuan against non-dollar currencies, a further step to freeing up its foreign exchange market.
Hurricane Rita, however, dominated attention in European stock markets and shares rose as crude oil prices eased on hopes Rita will not strike the main Texas refining hub near Houston.
U.S. crude oil (CLc1: Quote, Profile, Research) shed 80 cents or 1.3 percent to $65.6 a barrel, extending overnight losses of 30 cents.
Rita, which lost some of its intensity and was downgraded to a Category 4 storm, was still expected to make landfall on Friday or early Saturday.
U.S. stock futures prices indicated a weaker start on Wall Street, where shares rose on Thursday as oil prices slipped.
China's move to widen the daily permitted trading band for the yuan against non-dollar currencies to 3.0 percent from 1.5 percent initially sparked dollar sales.
The dollar fell to 111.02 yen from 111.70 yen before the announcement by China's central bank, but recovered to 111.5 by 1020 GMT.
The yen gained ground against the euro , with the euro slipping to 135.07 yen from around 135.5.
"The market doesn't know what to make of it," said Neil Mellor, currency strategist at Bank of New York in London.
"They saw the headlines and they began to sell the dollar but I think it will come back when they realise it's the non-dollar bands (that were changed)," he said.
German Bund and U.S. Treasury future hit session lows, with the December Bund future falling to 123.51 (FGBLZ5: Quote, Profile, Research) , distancing itself from contract highs hit above 124 hit on Thursday, before recovering.
China's announcement was aimed at further liberating the foreign-exchange market following the country's shift from a dollar peg to a managed float of its currency on July 21, when it also revalued the yuan by 2.1 percent.
It came just hours before China's finance minister and central bank governor meet their counterparts from the Group of Seven industrial nations in Washington.
SHARES FIRMER
European shares gained after two days of losses as crude oil prices fell.
The pan-European FTSEurofirst 300 index was 0.2 percent stronger at 1,203.8 points, off a 40-month high of 1,221.8 points hit this week, but still up about 15 percent so far this year.
Shares in Swedish savings firm Skandia (SDIA.ST: Quote, Profile, Research) fell 1 percent after it said it will cooperate with South Africa's Old Mutual (OML.L: Quote, Profile, Research) and not seek alternative bidders.
Oil companies BP (BP.L: Quote, Profile, Research) and Total (TOTF.PA: Quote, Profile, Research) eased and capped gains in the broader market.
Tokyo markets were closed for a holiday while Asian shares fell, with investors still worried as the storm neared Texas.
Gold prices were steady at $463.5 an ounce after rallying by nearly five percent this week to hit a near 18-year high of $475 a day earlier.
Copper prices touched a new record high of $3,795.5 a tonne in pre-market trading on the London Metal Exchange on fund buying, dealers said.
To see the position of Hurricane Rita Reuters 3000 Extra users can click on
http://www.nhc.noaa.gov/refresh/graphics_at3+shtml/085714.shtml?tswind120