Reuters: US Dollar Report: FOREX-Euro pulls back from 2-month high vs dlr, awaits ECB cues

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FOREX-Euro pulls back from 2-month high vs dlr, awaits ECB cues May 2nd 2013, 05:51 Thu May 2, 2013 1:51am EDT * Euro slips, stays below two-month high vs dollar * Fed recommits to aggressive stimulus programme * ECB next in focus, then U.S. jobs on Friday By Masayuki Kitano SINGAPORE, May 2 (Reuters) - The euro eased versus the dollar on Thursday and stayed below the previous day's two-month high, but further losses could be limited with the market already positioned for a possible European Central Bank interest rate cut. The euro inched down 0.1 percent to $1.3169. The single currency had hit a two-month high of $1.3243 on Wednesday on trading platform EBS, as the dollar retreated after data showed that U.S. companies hired the fewest employees in seven months in April. The euro's immediate fortunes depend on the ECB, which is seen likely to deliver a token 25 basis-point rate cut to its 0.75 percent benchmark refinancing rate at its meeting later on Thursday. Anything less than a rate cut could give a boost to the euro, traders said. Sim Moh Siong, FX strategist for Bank of Singapore, said the euro could prove resilient even if the ECB were to cut its main refinancing rate. "The ECB rate cut has been priced in, so even if they cut... it shouldn't really impact on the euro too much," he said, adding that the recent weakness of U.S. economic data may help support the single currency. "What would have a more material impact on the euro in terms of downside risk would be a deposit rate cut, but I don't think that is on the table," he added. The deposit rate, currently at zero, acts as a floor for money markets, and the ECB has made clear it has no appetite to take it into negative territory. The dollar stood at 81.675 against a basket of currencies, having hit a two-month low of 81.331 on Wednesday. The greenback had pulled away from its two-month trough after the U.S. Federal Reserve recommitted to its aggressive stimulus programme on Wednesday and kept its options open on what it would do next. That had disappointed some in the market looking for a clear indication of bigger debt purchases, driving U.S. Treasury yields up from four-month lows and helping the dollar trim broad losses. U.S. JOBS DATA Yet with U.S. data turning soft, some analysts said the Fed is more likely to respond by increasing its debt purchases rather than taper off. Analysts at Barclays Capital said the Fed's stance was "incrementally dovish" and suggested that real yields have room to fall. A focal point for the market is the closely watched U.S. jobs data due on Friday. In addition to the weaker-than-expected ADP National Employment Report, two separate reports on manufacturing released on Wednesday also showed employment slowed in April, pointing to the risk of a soft reading from Friday's jobs data. Against the yen, the dollar edged down 0.3 percent to 97.13 yen, staying below a four-year high of 99.95 yen set in April. Elsewhere, the Australian dollar fell 0.6 percent to $1.0224 . The Aussie dollar sagged after Australian building approvals unexpectedly slipped 5.5 percent in March against forecasts of a rise of 1.3 percent. The Australian dollar got little help from the final HSBC reading of China's PMI for April, which came in at 50.4, largely in line with a flash reading of 50.5. The result, however, failed to quell fresh concerns about the strength of China's economy following recent soft data. China is Australia's single biggest export market. Link this Share this Digg this Email Reprints

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