Reuters: US Dollar Report: FOREX-Aussie sags to 2-yr low, yen bolder as Nikkei pares gains

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FOREX-Aussie sags to 2-yr low, yen bolder as Nikkei pares gains May 29th 2013, 06:49 Wed May 29, 2013 2:49am EDT * Dollar moves up across the board, but loses ground to yen * Aussie breaks key support, slips further * Strong US data stands out against weakness elsewhere-economist By Sophie Knight TOKYO, May 29 (Reuters) - The yen strengthened on Wednesday as Japanese stocks fell, capping the dollar's gains against a basket of currencies as it hovered near a three-year high. The dollar lost 0.1 percent to 102.26 yen, locking step once again with the Nikkei, which struggled to stay above water in a choppy session. It finally squeezed out a 0.1 percent gain on the day. That came a day after the dollar jumped 1.4 percent after robust consumer confidence and housing U.S. data raised expectations the Fed may end its easy programme early, propelling 10-year Treasury yields to a one-year peak. "So far all figures seem to be much better than expected ... the downward pressure on the dollar-yen is already over," said an executive at a research company who preferred not to be identified. "Exporters are now offering 102.70-80. They have been quiet but now they're trying to sell any rally to the 103 figure ... I think hedge fund guys started to buy upside today, so the downside pressure has shrunk from the last two days." The dollar index resumed its boisterous streak on the news, rising 0.2 percent to 84.368 to approach a 3-year high of 84.498 hit on May 23. "Expectations they will stop QE is a factor, but I think more than that it's about the fact U.S. growth outstrips that of Japan and Europe. Even if they didn't stop QE, I think the general trend for dollar buying would continue," said Daisuke Karakama, market economist at Mizuho Corporate Bank. The dollar's strength piled pressure on the Australian dollar, which skidded 0.7 percent, breaking through a significant support barrier at $0.955 to a 2-year low of $0.9537 . That reinforced its recent bearish trend, with market participants losing hope that it will regain parity soon. The Aussie has now lost 7.7 percent this month, with fears of slowing growth in China and a surprise rate cut from the central bank continuing to pressure it downwards. Adding to the downbeat tone was data showing that Australian construction work in the first quarter fell 2 percent on the previous quarter, compared to expectations of a 1 percent rise according to a Reuters poll. "For the time being, a bearish AUD view is better expressed against the NZD (AUD/NZD completed a large top earlier this year) though a break below 0.9580 in AUD/USD would likely suggest that the USD is gaining a stronger bullish tone once again," Barclays analysts said in a note. On Wednesday, the Aussie lost 0.5 percent against the Kiwi dollar to 1.1862, hitting a fresh 4-1/2-year low of 1.1837. The euro was steady at $1.2860 after dropping 0.6 percent on Tuesday following comments from European Central Bank officials that the European Central Bank may cut interest rates into negative territory. ECB governing council member Christian Noyer said the central bank should be prepared to cut rates if necessary, while executive board member Peter Praet said the bank could do so if necessary, a day after another executive board member, Joerg Asmussen, said the loose policy would stay as long as required. A negative rate cut is expected by market participants to push the euro out of its now well-worn range of $1.28-1.32 it has carved out in the past few months. Link this Share this Digg this Email Reprints

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