The Dollar climbed to a seven-week peak against the Yen and moved further away from a record low versus the Euro on Friday after Citigroup's results sparked hope that the worst of the credit crisis has passed. Lately, troubles at US financial firms have been triggered by weakness in the housing market, but Citigroup's earnings have tempered worries about the sector and boosted risk appetite, supporting Dollar. Citigroup, the largest US bank, posted a quarterly loss of $5.1bio and pretax write-downs of $6bio. Shares in the company rose as investors were appeased by efforts being made to get past its credit problems and drive down costs.
On Friday, EurUsd fell 0.57% on Friday at 1.5815 after posting intraday low 1.5712, its steepest decline in nearly three weeks, well away from a record peak of 1.5983 hit earlier in the week and posting. UsdJpy rose 1.27% to 103.68, after reaching its strongest since late February at 104.65. UsdChf rose to a five-week high at 1.0285 and last traded at 1.0183, up 1.26%, posting its largest daily increase since April 1. GbpUsd rose 0.35% to 1.9977.
Despite the Dollar's gains, analysts cautioned that although US bank earnings this quarter have not been as good as some had expected, there are still indications the credit crisis is far from over. The Euro got a brief boost on remarks by European Central Bank Governing Council member Klaus Liebscher. He said no room exists to cut euro zone interest rates, adding that he is not ruling out tightening in the region. The euro has jumped 8.4% to the Dollar this year on the view European interest rates will stay put at 4% until later this year. The Federal Reserve, on the other hand, is seen cutting rates further from the current 2.25%. More US cuts would help keep euro zone rates significantly above those in the United States, keeping the Euro's yield appeal intact.
Analysts said the market was taking a breather ahead of 1.6000 and market participants said Euro selling would likely be short-lived, as ongoing inflation pressures will prompt the ECB to hold rates at 4% at least through Q3.