DAILLY FOREX REPORT FOR 26 SEPTEMBER 2014

MARKET HEADLINES
 

Dollar marches to four-year high; euro, oil wilt
The dollar hit a four-year high and oil hovered near a two-year low on Thursday, as investors wagered the United States will be one of the few economies healthy enough to wean itself off of central bank aid in the near future. Share markets in Europe started with small gains as Britain and France debated joining US-led military action against Islamist militants and as the euro sank to a 22-month low on bets the ECB will need a major stimulus effort. Its President Mario Draghi reiterated in a newspaper interview again on Thursday there was more the ECB can do if necessary. His words came as the central bank released its latest batch of lending data that, like it has for months, showed there is little in the way of demand for credit in the euro zone's still-struggling economy. "ECB President Mario Draghi continues to beat the QE ( quantitative easing) drums ... so hardly surprising that euro/dollar is trading at even lower levels this morning," said Esther Reichelt, a currency strategist at Commerzbank," Britain's FTSE, Germany's DAX and France's CAX rose 0.1-0.3 per cent to put the region in the black after a choppy few days, but it was the currency market where most of action was.

 Euro falls to 22-month low vs dollar on diverging rate outlooks
The euro hit a 22-month low against the dollar on Thursday on the prospect of diverging monetary policy between the Federal Reserve and the European Central Bank as rate differentials swing decisively in the greenback's favour. The common currency fell to $1.2730 on trading platform EBS, its lowest since November 2012, and was down 0.3 per cent on the day. The dollar index hit a new four-year high. The latest drop came as yield differentials between US 10-year Treasuries and their German counterparts traded near 15-year highs, driving more investors to buy the dollar. A recent batch of economic data has also highlighted the diverging economic outlook for the euro zone and the United States. While German business sentiment fell again in September to its lowest level in nearly 1-1/2 years, sales of new U.S. single-family homes surged in August to their highest level in more than six years. ECB President Mario Draghi kept alive expectations of more policy steps in the euro zone, including the possible use of sovereign bond purchases, also known as quantitative easing (QE), to revive the region's stalled economy. Draghi told the Lithuanian business daily Verslo Zinios the ECB was ready to use additional unconventional instruments or change the size of current asset purchase programmes if it became necessary to address risks of very low inflation.

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