Reuters: US Dollar Report: FOREX-Dollar plucked off lows, Aussie edges up after no change by RBA

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FOREX-Dollar plucked off lows, Aussie edges up after no change by RBA Jun 4th 2013, 06:35 Tue Jun 4, 2013 2:35am EDT * DXY up from one-month lows, but market cuts long USD positions * Dollar moves back above 100 yen * ISM shows contraction in factory activity * Aussie dollar pares losses after central bank stands pat By Sophie Knight TOKYO, June 4 (Reuters) - The U.S. dollar found a foothold back above 100 yen on Tuesday after suffering a sharp setback in the previous session, when disappointing data cooled speculation the Federal Reserve would scale back its stimulus anytime soon. The dollar index also recovered to 82.837 after sliding as much as 1 percent to 82.428 on Monday following news the Institute for Supply Management (ISM)'s index of U.S. factory activity fell to 49.0, its lowest since June 2009. The ISM sent the dollar crashing through the psychologically important level to a four-week low of 98.86 overnight on the ISM data, marking a 4.9 percent drop from a 4-1/2 year high of 103.74 set last month. On Tuesday, the dollar reclaimed 0.5 percent to 100.09 yen , initially bounced off its lows early on Tuesday after sources told Reuters that Japan's government will urge public pension funds - a pool of more than $2 trillion - to increase their investment in equities and overseas assets. Market participants said the news would not be taken in earnest until the government announced it officially - which sources said could come as early as Wednesday, when Prime Minister Shinzo Abe is due to make a speech about his growth strategy. "I think a lot of people were waiting to buy on the dip, around the 99.5 level and so I think they are using this as a trading factor," said Kyosuke Suzuki, director of FX at Societe Generale in Tokyo. "But there's still downside risk for the dollar-yen, with the Nikkei still in a correction phase," he said. The dollar was also spurred on by a 2 percent gain for the Nikkei stock index, its biggest one-day rise in three weeks. Plummeting shares have pressured the greenback as investors unwind their long positions on the dollar and buying of Japanese shares, a trade that dominated the market since November. The Australian dollar trimmed its losses to 0.4 percent to $0.9729 after the Reserve Bank of Australia (RBA) kept its cash rate steady at a record low of 2.75 percent, as expected. Governor Glenn Stevens said easing was still on the table if the inflation outlook did not change. The dollar's retreat helped the Aussie rally near 2 percent on Monday, its biggest one-day rise in about a year that moved it further away from a 19-month trough of $0.9528 plumbed on May 29. "Right now the market is not very concerned with what Australia's central bank does - the much bigger factor is the Fed," said Makoto Noji, senior strategist at SMBC Nikko Securities. "It seems that the Fed's stance has changed somewhat: before it seemed like there was a 50-50 possibility of tapering QE3 early and now it seems less likely. Good payroll data would change that, but at the very least we should hear something more concrete at its next meeting," he added. The market's next focus is a U.S. jobs report out on Friday, which could support the prospect of the Federal Reserve winding down its asset-buying programme early. But market participants say disappointing data such as the ISM suggests bullish bets on the dollar in recent weeks in hope of such a move were overdone. "We think USD long positions are likely to remain under pressure heading into Friday's jobs report, and the employment number will likely need to beat the 165,000 consensus significantly to revive USD upside momentum," said Daniel Katzive, strategist at BNP Paribas. Renewed pressure on the greenback saw the euro briefly pop above $1.3100 for the first time since May 9. It was last at $1.3068 with resistance seen at the overnight high of $1.3108. This is followed by $1.3141, the 76.4 percent retracement of its May 1-17 decline. The euro also pulled away from a four-week low of 129.49 yen it struck overnight, tacking on 0.3 percent to 130.48 as it tracked the dollar's gains against its Japanese counterpart. Link this Share this Digg this Email Reprints

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