Dollar rebounds after Citi bank gains

The dollar headed for a weekly advance against the euro, rebounding from a record low on signs U.S. investment banks will withstand credit-market losses stemming from the collapse of the subprime-mortgage market. The dollar rose versus a basket of six major currencies on Friday, boosted after Citigroup reported a smaller-than-expected second quarter loss, calming some jitters on U.S. financial sector health. Citi, the biggest U.S. bank, reported a second-quarter loss per share of $0.49, smaller than forecasts of around $0.61. It took credit costs of $7.2 billion, lighter than some estimates of around $9 billion. As well as injecting fresh impetus into the dollar, the results saw stock markets move into positive territory and European government bonds hit session lows, with financial sector sentiment soothed slightly by some forecast-beating earnings this week. EUR/USD currently is trading at $1.5842 as of 16:42 pm, GMT 18th of July.

The pound fell on speculation the U.K. government will boost borrowing as Chancellor of the Exchequer Alistair Darling introduces new spending guidelines. The pound dropped to 79.28 pence per euro, from 79.16 yesterday, and to $1.9950 from $2.0038. The U.K. government's new spending rules will allow it to break limits on public sector debt, the Financial Times said today, without citing anyone. A Treasury spokesman said the report is ``pure speculation.'' ``Overall, the report about the U.K. Treasury added to negative sentiment against the pound,'' said Tom Levinson, a currency strategist in London at ING Bank NV. The currency may fall to 80 pence versus the euro next week, Levinson said. GBP/USD is currently trading at $1.9965 as of 16:51 pm, GMT 18th July.

European Central Bank President Jean-Claude Trichet sees economic growth in the euro zone stalling in the second and third quarter, before a gradual return to ``moderate'' growth, Le Figaro said. The ECB remains committed to guaranteeing medium-term price stability and getting inflation back to ``below 2 percent, close to 2 percent,'' Trichet said in a joint interview with the French daily and three other European newspapers. In other news the Canadian dollar strengthened for the first time in three days as crude oil rallied and a government report showed wholesale sales rose for a third month in May. The Canadian dollar increased versus the 16 most-traded currencies and is poised to gain for a second week, rising 0.6 percent since July 11. It has appreciated 1.8 percent this month. USD/CAD is currently trading at 1.0050 as of 17:14 pm, GMT, 18th July.

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