FOREX-Euro surges to 6-wk high vs dollar; SNB cuts rates

Thu Dec 11, 2008 7:12am EST
 

* Euro hits 6-wk high at $1.3158 EUR=, dollar index falls

* ECB's Stark comments cool rate cut expectations

* SNB cuts rates by 50 bps, as expected

* U.S. auto deal makes progress, rocky road seen in Senate

(Adds quotes, updates prices)

By Tamawa Desai

LONDON, Dec 11 (Reuters) - The euro hit a six-week high against a broadly weaker dollar on Thursday with doubts creeping in as to whether pent-up demand for the U.S. currency over the year-end will be as strong as previously thought.

Implied interest rate spreads also moved in the euro's favour after European Central Bank Executive Board member Juergen Stark said late on Wednesday the bank did not have a lot of room for manoeuvre on rates after its cut last week.

Having climbed on a wave of risk aversion in recent months in tandem with the low-yielding Japanese yen, some analysts said further dollar demand into the year-end from deleveraging flows might be showing some sign of cooling. A fall in volatility also indicated that extreme risk aversion may be easing.   Continued...