Reuters: US Dollar Report: FOREX-Euro edges higher before Jackson Hole meeting

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FOREX-Euro edges higher before Jackson Hole meeting Aug 30th 2012, 08:38 Thu Aug 30, 2012 4:38am EDT * Euro edges up vs dollar ahead of Jackson Hole, ECB * Market waits to see if Fed hints at more easing * China concerns push Australian dollar to 1-month low * Little impact on yen from Japan political standoff By Jessica Mortimer LONDON, Aug 30 (Reuters) - The euro edged higher against the dollar on Thursday as investors waited to see whether U.S. Federal Reserve Chairman Ben Bernanke delivers firmer hints on more monetary easing at a meeting of central bankers this week. Any signal the U.S. central bank will embark on another asset buying programme, or quantitative easing, when he speaks at Jackson Hole, Wyoming on Friday would weigh broadly on the dollar. This would give an additional boost to the euro, which has been buoyed recently by expectations the European Central Bank will unveil concrete plans next week to help bring down crippling borrowing costs in Spain and Italy. The euro was up 0.1 percent at $1.2545, edging towards last week's high of $1.2590, which roughly coincides with its 100-day moving average. Above this level would mark its strongest in eight weeks. However, its rise was limited due to uncertainties about Fed policy, with recent improvements in U.S. economic data marginally reducing the chances of more QE. "The risk with Jackson Hole is that unless there is further strong signals of more easing the market will take it as a disappointment," said Christian Lawrence, currency strategist at Rabobank, adding that this would be positive for the dollar. "The bar is quite high and if there is any paring back of talk of QE (quantitative easing) the market is likely to react more because it is more or less expecting it." The euro was also lifted after Chinese Premier Wen Jiabao was quoted by state news agency Xinhua as saying China is to continue to buy EU government bonds after fully assessing risks. But concerns about the outlook for China limited investors' appetite for taking on risk as a flagging Chinese economy looked to be curbing demand for commodities such as steel, iron ore and copper. This weighed in particular on higher-yielding and commodity-linked currencies like the Australian dollar, which fell to a one-month low of $1.0318. This took it very close to its 200-day moving average at $1.0311 and technical analysts said a break below there could deepen its losses. It was last down 0.1 percent at $1.0332. YEN SHRUGS OFF JAPAN POLITICS The yen stayed within its recent range against the dollar, showing little reaction after Japan's opposition-controlled upper house passed a censure motion against Prime Minister Yoshihiko Noda the previous day. The dollar dipped 0.1 percent to 78.62 yen while the euro edged up 0.1 percent to 98.70 yen. The censure is non-binding but effectively means that the opposition will stop cooperating with the government on most bills, including budget-financing legislation the government needs to sell bonds for this fiscal year's budget. Analysts said the political wrangling is unlikely to have too much impact on the yen, as ruling and opposition parties are likely to eventually hash out a compromise. "The market doesn't seem to think that the chances of Japan facing a shutdown of government functions is a clear and present danger," said Masafumi Yamamoto, chief FX strategist Japan for Barclays Capital in Tokyo. Link this Share this Digg this Email Reprints

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