Reuters: US Dollar Report: FOREX-Euro supported, but risk of ECB disappointment high

Reuters: US Dollar Report Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

FOREX-Euro supported, but risk of ECB disappointment high Sep 3rd 2012, 08:20 Mon Sep 3, 2012 4:20am EDT * Expectations of ECB action this week to support euro * China manufacturing data disappoints * Aussie at 6-week low after weak data By Anirban Nag LONDON, Sept 3 (Reuters) - The euro was steady against the dollar on Monday, drawing support from expectations the European Central Bank will take bold steps this week to stem the debt crisis, although flagging growth prospects were likely to limit gains. The growth-linked Australian dollar fell to fresh six-week lows against both the dollar and the yen as investors sold up amid more signs of weakness in the Chinese economy and a set of weak Australian data. The euro stood at $1.2575, flat from levels in late U.S. trade and off an eight-week peak of $1.2638 set on Friday after Federal Reserve chief Ben Bernanke's speech fanned expectations of further stimulus to revive growth. Traders cited reported option barriers at $1.2650, with decent resistance at the July 2 high of $1.2681. The euro has also been underpinned by expectations the ECB will soon unveil a bond buying programme, probably at its policy meeting on Thursday, aimed at lowering borrowing costs for peripheral euro zone countries like Spain and Italy. That is expected to lower the risk premia - or the additional cost over low-risk securities - on holding European assets as well as the euro. "While the euro could rally to the $1.2670/80 region as short positions are trimmed, we are likely to see investors sell into it as there is a great of deal of uncertainty about what the ECB may announce on Thursday," said Jeremy Stretch, head of currency strategy at CIBC World Markets. "Along with bond-buying plans there will be updates on growth and inflation. So there is a risk of disappointment." The ECB is likely to downgrade growth forecasts this week and this would build pressure on it to lower interest rates in coming months. Data on Monday showed German and French factory activity contracted in August. ECB President Mario Draghi skipped last week's Jackson Hole symposium to try to smooth over a deep rift within the ECB over the bond scheme that is increasingly being played out in public. Despite the differences within the bank, investors hope Draghi will prevail over German opposition to the programme. Reflecting such views, speculators have been cautiously trimming pessimistic positions on the euro over the past several weeks. Data from the U.S. financial watchdog showed on Friday that speculators have cut their bets against the euro to the smallest since April. FED EASING PROSPECTS The dollar was under pressure against the yen following Bernanke's speech. It last stood at 78.36 yen, near the three-week low of 78.187 hit on Friday. Bernanke said high unemployment is a grave concern and that the Fed would act as needed to strengthen the recovery, though he did not explicitly signal an imminent move, providing temporary relief to the U.S. dollar. "The dollar may be supported by likely buying from Japanese importers in the near term. But I do think it will test 78 yen," said Takahiro Suzuki, vice president of forex at Nomura Securities. A weaker-than-expected U.S. jobs report this Friday could bolster expectations of a looser U.S. monetary policy and weigh on the dollar in the run-up to the Fed's policy meeting on Sept 12-13, traders said. San Francisco Federal Reserve Bank President John Williams, known as a policy dove and a voter this year on Fed policy, called for a round of bond purchases that could eventually top $600 billion. The Australian currency fell to a near six-week low against the U.S. dollar, hit by a double whammy of weak Chinese and poor domestic data. The Aussie slid to a low of $1.0240, retreating from Friday's high of $1.0355. A report showing China's manufacturing sector slowed further in July and a weak reading in Australian retail sales added to worries that the Australian economy may be losing momentum from the mining boom spurred by Chinese demand. Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions