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New York/London: The dollar rose the most against the euro in more than two weeks as Citigroup first-quarter revenue beat analysts' estimates, fuelling speculation financial firms will weather credit market losses.
The yen fell against all of the major currencies, dropping to the lowest level this year against the euro, on speculation traders increased purchases of assets funded by loans in Japan. The dollar rose to a seven-week high against the yen.
"Citi's report is a bit of a relief in the sense that things are not getting worse," said Camilla Sutton, co-head of currency strategy at Scotia Capital in Toronto.
"All of that risk reduction is in favour of the dollar and against the yen."
The dollar rose 0.9 per cent to $1.5758 per euro at 9.22 am in New York, from $1.5908 on Thursday. The US currency increased 1.6 per cent to 104.09 yen, from 102.48 on Thursday. It touched 104.43 yen, the highest level since February 29. The euro rose 0.6 per cent to 164.03 per yen, from 163.03 on Thursday.
The pound traded within a cent of $2 on speculation the Bank of England may take mortgages off lenders' balance sheets. Sterling strengthened one per cent to 79.09 pence per euro.
Broad fall
The yen fell 2.4 per cent versus South Africa's rand and dropped 1.7 per cent versus the pound as a gain in US stock futures encouraged investors to resume carry trades, in which they get funds in a country with low borrowing costs and invest where returns are higher.
Japan's 0.5 per cent target lending rate, the lowest among developed nations, compares with 11.5 per cent in South Africa and 5 per cent in the UK.
"A number of people have reopened carry trades," said Chris Furness, London-based head of currency strategy at 4Cast, a research company that counts central banks among its subscribers.
Among the major currencies, the dollar posted its biggest gain against the Swiss franc as traders moved away from the Swiss currency, regarded as a haven in times of turmoil.
The dollar rose more than one per cent to 1.0244 against the Swiss franc. "People want to be optimistic because we've had so much bad news," said Divyang Shah, chief strategist in London at CBA Europe, a unit of Commonwealth Bank of Australia. "They want the corner to be turned."
Stock markets across Europe extended gains after Citigroup's results, with Germany's Dax Index climbing 1.4 per cent. Standard & Poor's 500 Index futures expiring in June added 1.2 per cent.
Futures on the Chicago Board of Trade show a 10 per cent chance the Fed will cut its 2.25 per cent target rate for overnight lending between banks by a half-percentage point this month, down from 46 per cent a week ago. The rest of the bets are on a quarter-point reduction.
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