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Monday, July 19, 2010

Will WORLD FOREX: Euro Gains Vs Dollar; Focus Is On Stress Tests Work ? NYSE- HAS,AAPL,WFC,DAL,GOOG,C,F,CPTC,GE,VALE,V,KO

(Dow Jones)--The euro rose against the dollar Monday as investors anticipated that stress tests of European banks would allay concerns about the region's banking sector.

The euro managed to gain in spite of a downgrade of Ireland's credit rating Monday and the breakdown in funding talks between Hungary and the International Monetary Fund over the weekend. A disappointing U.S. housing-market index also helped the common currency to gain against the dollar.

Initial results from the stress tests, due Friday, are the most important of this week's economic releases, said Jessica Hoversen, fixed-income and foreign-exchange analyst at MF Global in Chicago.

Some fears about euro-zone banks have been mitigated in recent weeks, but "the ability of the stress tests to soothe investor concerns will rely on the robustness of the tests," she said.

Monday shortly before noon, the euro was at $1.2971 from $1.2927 late Friday, according to EBS via CQG. The dollar was at Y86.67 from Y86.61, while the euro was at Y112.43 from Y111.95. The U.K. pound was at $1.5227 from $1.5298. The dollar was at CHF1.0513 from CHF1.0519.

The ICE Dollar index, which tracks the dollar against a trade-weighted basket of currencies, was at 82.452 from 82.535.

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The dollar ticked down against the euro and yen after the National Association of Home Builders housing-market index fell to 14 in July, its lowest reading since April 2009, showing that U.S. housing activity continued to decline after the expiry of a home buyers' tax credit. Economists had expected a reading of 16.

Concerns over the U.S. economy have dominated currency markets recently. A string of disappointing U.S. data releases fueled fears that the U.S. recovery is faltering and sent the U.S. currency to a seven-month low against the yen and a two-month low against the euro late last week.

However, anticipation over stress tests is now dominating trading, said Simon Smollet, senior foreign-exchange options strategist at Credit Agricole CIB in London.

Hasbro (NYSE:HAS) second-quarter profit climbed to $43.6 million, or 29 cents a share, from $39.3 million, or 26 cents a share, as declining costs more than offset a 7% slide in revenue to $737.8 million. The toy maker said the fall in revenue came after last year’s initial movie product ship-ins from the Transformers and G.I. Joe movies. The company still expects EPS and revenue to rise in 2010. Analysts had expected earnings of 25 cents a share. –MarketWatch

The dollar fell the most against the euro in 14 months and dropped to the lowest level this year versus the yen as economic reports added to evidence that the U.S. recovery is losing momentum. The greenback touched a level weaker than $1.30 versus the shared currency as minutes of the Federal Reserve meeting last month indicated policy makers trimmed their forecasts for growth. The euro rallied for a third straight week against the dollar before partial results of stress tests on the region’s banking system due on July 23. “It’s really dollar weakness based on some evidence the economy is slowing,” said Vassili Serebriakov, a currency strategist at Wells Fargo (NYSE:WFC) in New York. “The economic indicators are pointing strongly toward slower growth in the second half of the year.” –Bloomberg

Google (NASDAQ:GOOG) will stop selling its Nexus One smartphone after some dismal sales figures. The company announced on July 16 that it received its final order from the phone’s manufacturer HTC, Read Write Web reported. In the time it took Apple (NASDAQ:AAPL) to sell 1,000,000 iPhones, Google racked up a mere 135,000 Nexus One sales. –Daily Finance

Delta Air Lines (NYSE:DAL) swung to a second-quarter profit, topping analysts’ expectations, on a strong rebound for a key revenue gauge. The industry expects to see profits return for the latest quarter as monthly performance numbers have taken off, though fuel costs have been climbing. Business travelers and consumers are returning to the skies amid an improved economy, following a recession that weighed heavily on airlines’ results. Delta’s report is the first from the major U.S. carriers. For the period, Delta reported earnings of $467 million, or 55 cents a share, compared with a year-earlier loss of $257 million, or 31 cents a share. The latest quarter included 10 cents in charges from items such as merger costs and aircraft retirements. Revenue rose 17% to $8.17 billion. Analysts polled by Thomson Reuters most recently expected earnings of 63 cents a share on $8.25 billion in revenue. –The Wall Street Journal

The Committee of European Banking Supervisors is testing 91 banks to see whether the banks can withstand a three-percentage-point decline in gross domestic production from European Commission forecasts for 2010 and 2011. The committee will also test for resilience to sovereign risk at a level beyond the market conditions experienced in early May.

"I think people are still optimistic," said Smollet. "Banks will need extra capital, but hopefully the capital will be a reasonable amount that the market can provide."

That optimism helped the common currency to gain, even though Moody's Investors Service downgraded Ireland's credit rating, citing a rising debt burden, the high cost of rebuilding the country's banking system and sluggish growth as factors in the decision. The agency cut the rating from Aa2 from Aa1, with a stable outlook, indicating it isn't likely to consider a further downgrade soon.

"It registered with everyone as being a reasonable rating" and was probably already priced into the euro, said Smollet.

The other big news out of Europe was the dissolution of talks between the IMF and Hungary over that country's access to the remainder of its existing EUR20 billion standby credit line.

The euro shot almost 3% higher against the forint at the start of European trading hours to reach just over HUF290, taking the forint back down to its lowest levels in more than a year after negotiators for the IMF and European Union walked away from talks because Hungary hadn't delivered on required austerity measures.

The breakdown in talks between Hungary and the multilateral bodies has implications beyond Eastern Europe, as it offers a clear sign that international aid is tied to strict conditions.

-By F. McInni
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