Reuters: US Dollar Report: FOREX-Euro and kiwi slip on weak data; ECB eyed

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FOREX-Euro and kiwi slip on weak data; ECB eyed May 3rd 2012, 06:08 Thu May 3, 2012 2:08am EDT * Spike in NZ jobless rate knocks wind out of the kiwi dlr * ECB, Spanish bond sale in focus * Japanese markets on holidays, back Monday By Masayuki Kitano and Ian Chua SINGAPORE/SYDNEY, May 3 (Reuters) - The euro hovered near a two-week low against the dollar on Thursday, having fallen sharply overnight on the back of more depressing economic news out of Europe that has put the spotlight on the central bank's policy meeting later in the day. The single currency eased 0.1 percent to $1.3144. It fell as low as $1.3122 on Wednesday after data showed more weakness in Europe's manufacturing sector. Immediate support is seen around $1.3104, the April 23 trough. With recently downgraded Spain looking to raise funds in the bond market on Thursday, the European Central Bank will be under pressure at its policy meeting to do more to shield weaker euro zone members from additional pain. "It seems too early for another wave of easing, but that is where the risks are skewed. The outcome is continued downward pressure on EUR/USD," said Sebastian Galy, strategist at Societe General. But investors looking to diversify beyond the greenback had kept the euro far better bid than it should, he said. "We still like it to break below 1.30 and still expect to be burned out of this view before it does happen," suggesting such a move could take some time. Spain will hold an auction of three- and five-year bonds on Thursday in the first Spanish government bond sale since Standard and Poor's cut Spain's credit rating by two notches to BBB+ last week. The ECB meeting and the Spanish bond auction may pose some downside risk to the euro, especially when considering how the market is now positioned, said a trader for a major Japanese bank in Singapore. Market players had put on short-dollar and long-euro bets after U.S. Federal Reserve Chairman Ben Bernanke hinted last week at the possibility of further monetary easing, the trader said, adding: "We could see a little more downside (in the euro) due to position unwinding." Renewed pressure on the euro saw the dollar index pop back above 79.000, p utting further distance from a two-month trough of 78.603 plumbed on Tuesday. Against the safe-haven yen, the dollar inched up 0.1 percent to 80.20 yen, staying above a 10-week low of 79.64 set on Tuesday. A drop in the dollar to levels below 79.00 yen could prompt short-covering in the yen by longer-term players and spur further declines in the greenback, said the trader for a major Japanese bank. Such a move would likely require a strong impetus, however, the trader said, adding that there was a lot of talk of dollar-buying interest roughly in the 79.00-79.50 yen area. The New Zealand dollar fell after a jump in the local jobless rate caused markets to price in a small chance of a rate cut this year, a dramatic turnaround from just a couple of weeks ago. The market is implying a roughly 40 percent chance of a rate cut at the Reserve Bank of New Zealand's next policy meeting. The kiwi slid as far as $0.8040, lows not seen since late January. After trimming some of its losses, the kiwi stood at $0.8065, down 0.3 percent. Link this Share this Digg this Email Reprints

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