Reuters: US Dollar Report: REFILE-FOREX-Aussie sags to 2-yr low, yen strengthens as Nikkei slips

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REFILE-FOREX-Aussie sags to 2-yr low, yen strengthens as Nikkei slips May 29th 2013, 04:05 Wed May 29, 2013 12:05am EDT * Dollar moves up across the board, yen strengthens a tad * 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 broad gains after robust economic data released on Tuesday raised expectations the Fed may end its easy programme early, making the greenback more attractive. The Australian dollar also skidded through a significant support barrier at $0.955 to a 2-year low of $0.9543, reinforcing a bearish trend for the commodity-linked currency as hope faded that it will regain parity soon. It last bought $0.9567. The yen gained 0.3 percent to 102.14 against the dollar, regaining its correlation with the Nikkei, which slipped into negative territory during the morning session. The Japanese currency lost 1.4 percent on Tuesday after data showed U.S. consumer confidence reached a five-year high in May. Strong U.S. housing data reinforced speculation that the Fed could unwind its bond-buying programme earlier than scheduled, which helped push the Dow stock index to a record high and Treasury yields to a one-year peak. On Wednesday, the dollar index extended gains, rising 0.1 percent to 84.331, and approaching the 3-year high of 84.498 it 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 lost 0.4 percent, leaving it 7.7 percent down on the month, with a surprise rate cut from the central bank earlier this month widening the downside. "Breaking through important support levels like that means it won't settle down for a while. It would be great of course if you bought it now and it returned to its previous level, but it's best not to try that," said Kenichi Asada, manager of forex at Trust & Custody Services Bank. 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 0.4 percent against the Kiwi dollar to 1.1862, approaching a 4-1/2-year low of 1.1848 hit on Monday. The euro laid low 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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