WSJ:WORLD FOREX: Major Currencies Quiet; Lira, Ruble Gain
-- Traders seemingly put aside euro-zone worries until the new year
-- Pound marks time as 10-year gilt yields fall below 2% for first time
-- But Russian ruble gains on central bank interest rate moves
-- Lira also rises after Turkish central bank announces FX-selling auction
By Jessica Mead
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--The major currencies held steady in holiday-thinned European trade Friday, with emerging European currencies like the Turkish lira and Russian ruble showing the most signs of life.
With no fresh euro-zone news to drive investor sentiment, traders momentarily set aside lingering fears of euro-zone sovereign credit rating downgrades. That left major currencies trapped in tight trading ranges, with the euro settling around $1.3075 and the Australian dollar trading around $1.0150 against the dollar.
"The risks are still there and there's still a lot of bad news about but this is more a story for the first quarter of 2012," said Ankita Dudani, currency strategist at Royal Bank of Scotland Group PLC in London.
The pound was also rangebound as data showing output in the U.K.'s dominant services sector shrank in October competed for the attention of traders with news that yields on 10-year U.K. government bonds fell below 2% for the first time ever.
Market watchers expect trading volumes to remain light between now and the start of 2012, in the absence of fresh major developments in the long-running euro-zone saga.
"Liquidity is going to be bad. Most policymakers right now will be hoping for... nothing untoward in the euro zone. However, compared to last year, positioning in the euro is much more extreme to the short side and most market participants are aware of this. So it's not exactly certain that [the euro] will trade strongly on the back of it," Geoffrey Yu, senior currency strategist at UBS, said.
Would the euro stay above $1.30 against the buck until the new year?
"That's feasible but afterward we will have to see what the politicians come up with, especially in the run-up to the Jan. 30 [European Union] leaders summit," he said.
Yu also advised investors to pay attention to developments in China given the Chinese authorities' recent tendency "to give Christmas presents." Last year the People's Bank of China raised its one-year base lending rate on Christmas Day.
Certainly, emerging market currencies were among the main movers Friday.
The Russian ruble strengthened after Russia's central bank unexpectedly cut its refinancing rate, while increasing its repurchase agreement and deposit rates. The ruble hit its strongest level since early August against the euro, which fell to below RUB40.57.
Morgan Stanley called the move "neutral for monetary policy" as it represents a "narrowing but not an easing" of interest rates.
The Turkish lira also notched up gains against the dollar, rising almost 0.5%, after the Turkish central bank announced it would sell up to $1.35 billion at its daily foreign-exchange auction.
At 1131 GMT, the euro was trading at $1.3066 against the dollar, compared with $1.3051 late Thursday in New York, according to trading system EBS. The dollar was at Y78.06 against the yen, compared with Y78.17, while the euro was at Y101.97 compared with Y102.01. Meanwhile, the pound was trading at $1.5670 against the dollar, compared with $1.5681 late Thursday in New York.
The ICE Dollar Index, which tracks the greenback against a basket of currencies, was at 79.854 compared with 79.947 late Thursday in New York.
