WORLD FOREX: Dollar Generally Lower, But Sterling Slides

By Katie Martin

Of DOW JONES NEWSWIRES



LONDON (Dow Jones)--The dollar has fallen a little against most other major currencies through European trading hours, although it has gained against sterling, which is declining after last week's surprise gains.

Concerns that euro-zone finance ministers, who are meeting Monday and Tuesday, might bemoan the euro's current strength pushed the single currency to a session low of $1.4829 in Asian hours.

However, that currency move swiftly reversed in later Asian trading and the euro's climb accelerated as European trading began, offering a hint that markets aren't taking the prospect of solid action against euro strength seriously at the moment.



Analysts at BNP Paribas said that sentiment will likely shift only if there is a change in stance from Jean-Claude Juncker, prime minister of Luxembourg and head of the Eurogroup of euro-zone finance ministers.

"Juncker's recent position suggested that the current rate of the euro is not yet a concern, but that currency volatility is not liked. Should Juncker suggest that the level of the euro is a concern, then there will be a bigger euro bearish market impact," the bank said.

Aside from this issue, sterling held the market's attention once again. Last week, the struggling U.K. currency shocked most market watchers with an unexpected climb - a move that reflected nerves that the currency's recent drubbing had become excessive.

Sterling selling reached a fresh record high last week, according to data on speculative trading, although some of those sellers may have been forced to reverse course when the pound surprisingly climbed.

Monday, however the slide resumed, despite stronger-than-expected U.K. housing market data. The fresh negative sentiment stemmed from reports in the weekend press that Bank of England monetary policy committee member Adam Posen was ready to back an increase in BOE asset purchases.

A prominent group of economists also suggested that sterling will fall until 2014, piling further weight onto the pound Monday.

The next key risk for the pound will come Tuesday from the minutes of the most recent BOE monetary policy committee meeting, where the MPC left interest rates and asset purchases on hold.

Europe's emerging-markets currencies were moving a little higher amid broadly buoyant market sentiment, with the euro at CZK25.7890 against the Czech koruna and PLN4.1991 against the Polish zloty.

The Hungarian forint traded steadily around HUF266.85 against the euro. Hungary's central bank is expected to cut interest rates by 50 basis points to 7% at 1200 GMT.

At 0928 GMT, the euro was trading at $1.4933 up from $1.4885 late in New York Friday, according to EBS. That marks a slight pullback from the day's high of $1.4950.

The dollar was down at Y90.63 from Y90.87, while the euro was little changed at Y135.34 from Y135.30.

The pound was at $1.6279, up from its session low of $1.6248 but below late Friday's level of $1.6355. The dollar index, a trade-weighted measure of the greenback's value, was lower at 75.501 from 75.624.