Reuters: US Dollar Report: FOREX-Euro holds breath amid waning Bernanke hopes

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FOREX-Euro holds breath amid waning Bernanke hopes Aug 31st 2012, 05:36 Fri Aug 31, 2012 1:36am EDT * Expectations of clear-cut QE3 hint at Jackson Hole dim * Market jittery on Europe as shares fall * Yen shows no reaction to weak Japan output data * Aussie at 1-month low, just above key Ichimoku support By Hideyuki Sano TOKYO, Aug 31 (Reuters) - The euro hovered near this week's low against the dollar on Friday, as the market grew nervous whether the U.S. Federal Reserve chief will indicate the possibility of imminent monetary stimulus later in the day. A fall in European and some other shares to four-week lows are also fraying traders' nerves after the single currency enjoyed a month-long recovery on hopes of more policy action to counter the debt crisis infecting Europe. The yen strengthened against the dollar though traders said the move reflected month-end repatriation by Japanese exporters rather than speculation about a speech by Ben Bernanke, who will speak on "Monetary Policy Since the Crisis" at 1400 GMT. "Market expectations on his Jackson Hole speech have receded a bit. He is unlikely to give clear signals as recent economic data has not been so bad," said Yunosuke Ikeda, senior FX strategist at Nomura Securities. U.S. consumer spending rose by the most in five months in July, data showed on Thursday, while the number of Americans filing new claims for jobless benefits held steady last week. The euro stood at $1.2518, flat from late U.S. levels and not far from its low so far this week, though it looks likely to end up on the month as hopes that the European Central Bank could start buying Spanish bonds to lower Madrid's borrowing costs have supported the currency. Also supporting the euro were expectations that the Fed may start more asset purchases, dubbed QE3 in markets as that would be the Fed's third round of quantitative easing, at its next policy meeting on Sept 12-13. Money printing by the Fed is likely to cheapen the dollar and hence boost the euro but optimism for more stimulus steps to prop up growth have waned in the past couple of days. Atlanta Fed President Dennis Lockhart, seen as a centrist voter on U.S. monetary policy, also said on Thursday that it will be a "close call" when U.S. central bank policymakers meet next month to decide whether to ease policy more. Some economists think the Fed might not start QE3 in September, a scenario that is likely to weigh on the euro. "We do not expect the Federal Reserve to start QE3 in September. If he signals that at his Jackson Hole speech, that would support the dollar though he may not give a clear stance ahead of the payroll data," said Masafumi Yamamoto, chief FX strategist at Barclays in Tokyo, referring to the U.S. employment report due on Friday next week. REAL TEST While the euro has support around $1.2465 -- this week's low as well as its tenkan line on the daily Ichimoku chart -- the currency has been unable to rise above its seven-week high of $1.2590 hit last week. After a brief summer lull this month, the common currency is expected to face a real test from next month, as investors look to the ECB's next step to help Spain stand on its feet again to finance its debt. Highlighting strong resistance to President Mario Draghi's bond buying plan among German central bankers, Germany's Bild newspaper reported on Friday that Bundesbank chief Jens Weidmann considered resigning several times because of his opposition to the plan but was persuaded by the German government to stay. The market took it in its stride for now, however, amid the perception that Draghi has support of other key German policymakers such as Prime Minister Angela Merkel and ECB board member Joerg Asmussen and can push his plan through. The dollar fell 0.3 percent against the yen to 78.41 yen due to month-end selling by Japanese exporters, though it stayed within its familiar range of the past week or so. The yen showed no response to surprisingly weak Japanese industrial output data, which fell 1.2 percent in July despite economists' expectations of a rise of 1.7 percent. Still, the data added to evidence that a slowdown in China was putting the brakes on economic activity in other Asian countries. One major victim of China's slowing growth, the Australian dollar, continued to underperform, hitting a fresh one-month low of $1.0276 on Thursday and last stood at $1.0292. Against the yen it also hit a fresh one-month low of 80.72 yen. As Australia's mining boom has been driven by China's strong appetite for iron ore and other commodities, signs of a sharp fall in demand for these products has put the Aussie under pressure this month. On the Ichimoku charts, the Aussie is trading just above an important support of the cloud top against the dollar, at $1.0279 on Friday. Below that, one major support is its 38.2 percent retracement of its rise from June to early August at $1.0220. Link this Share this Digg this Email Reprints

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