FOREX-Dollar rallies vs euro on ECB move, bank troubles

The euro traded near a five-week low against the dollar on Thursday as the European Central Bank cut interest rates and left the door open to further borrowing cost reductions in the months ahead.

The euro traded close to a five weeks bottom against the dollar Thursday while Central Bank European cut interest rates and left the open door of others of reductions of cost of credit in the months come.

The dollar, while waiting, went up against Yens while the hopes which the government of the United States would give more money to the worried banks again pushed some investors in capital of high-risk such as stocks.

The ECB cut rates by half of point to 2 percent Thursday, matching with low record rate, because the pressure of the prices relieved and the diffusion of recession. For details, see [identification: nLF501185].

But the tradesmen sold the euro strongly after the President Jean-Claude Trichet 'of ECB the press conference of post-meeting of S, which many mixed messages sent known as about the synchronization of the next cut of rate. Trichet announced the next stage can not come until March.

With data showing the economic outlooks for the zone euros deteriorating quickly, the investors say that the ECB will have to thereafter carry costs of credit to the bottom to approximately 1 percent.

"The euro continues to suffer from the view that officials in the euro zone are dragging their feet in terms of easing policy as needed," said Omer Esiner, senior market analyst at Ruesch International in Washington.

The euro hit a five-week low of $1.3028 , according to Reuters data. After failing to break below $1.30, traders said profit-taking pushed it back to $1.3145, down 0.1 percent on the day.

UBS senior currency strategist Benedikt Germanier said the ECB "will probably have to cut by half a percentage point again, so we're staying long the dollar from $1.3550 with a target of $1.28."

Fears about Citigroup's (C.N: Quote, Profile, Research) fate and news of a push by Bank of America (BAC.N: Quote, Profile, Research) for more government aid earlier added to worries about credit losses in the financial sector.

But optimism rose after Congressional Democrats announced plans for an $825 billion tax cut and spending bill that they hope will help President-elect Barack Obama boost the staggering U.S. economy. [ID:nN15520802].

That helped the dollar add 0.8 percent to 89.84 yen and boosted sterling by 0.6 percent to 1.4655. High-yield currencies also benefited, with the Australian dollar up 1 percent at $0.6652 .

Obama's inauguration next week and hopes for a big stimulus package "might be a slight positive" for risk-taking, as "it removes some uncertainty," said Meg Browne, currency strategist at Brown Brothers Harriman in New York.

But she also said the euro would have to climb above $1.33 to signal a lasting turn in sentiment.

Analysts said the euro looked like it would continue to struggle given recent weak economic data and expectations of more ECB interest rate cuts.