Reuters: US Dollar Report: REFILE-FOREX-Dollar-yen struggles in choppy session, Aussie in crosshairs

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REFILE-FOREX-Dollar-yen struggles in choppy session, Aussie in crosshairs Jun 6th 2013, 07:26 Thu Jun 6, 2013 3:26am EDT * Dlr-yen fails to regain ground after 1 pct fall a day earlier * Has choppy day, tracking volatility in the Nikkei * ECB to meet, seen standing pat on rates * Commodity currencies under heavy pressure By Sophie Knight TOKYO, June 6 (Reuters) - The dollar failed to regain much ground against the yen by late Asian trade on Thursday after losing 1 percent a day earlier, with the currency pair continuing to be whipped around by volatility in Tokyo shares. The greenback last bought 99.16 yen, a gain of 0.1 percent, but it traded as low as 98.86 yen and as high as 99.47 during the day. "Even if the Japanese stock market goes back up it will likely stay volatile and that will make the yen hard to sell, regardless of whether the market is bullish on the dollar," said Masashi Murata, senior currency strategist at Brown Brothers Harriman. Dollar-yen has been tracking the Nikkei stock average over its steep decline in the past two weeks, as foreign investors wind back the hedges they had put on for protection from the yen's slide between November and May. The dollar's fall on Wednesday was exacerbated after a closely watched report showed hiring by U.S. firms was sluggish in May. That raises the risk that Friday's non-farm payrolls could disappoint and lessen the likelihood that the Federal Reserve will taper its easing programme early. "U.S. data might be disappointing but so far the direction of the economy hasn't changed - people aren't exactly worried about another recession. I therefore think 98 could be an appropriate level for the dollar-yen going into next week," Murata said. All eyes are now on the Japanese authorities to see if they can somehow stop the slide in stocks. If not, the yen could rise a lot further. The Nikkei ended down 0.9 percent on Thursday which came after a 3.8 percent slide a day earlier when the market was disappointed by a key policy speech from Japanese Prime Minister Shinzo Abe. "There is little else that the Bank of Japan can do now to calm markets," said Koji Fukaya, CEO of FPG Securities. Bond yields have headed up since April 4 after the BOJ announced an aggressive overhaul in its monetary policy, which included a pledge to snap up 70 percent of all new debt issues. Data showing Japanese investors were net sellers of foreign bonds for a third straight week to June 1 could provide investors with another incentive to unwind extremely bearish positions in the yen. The euro recovered 0.2 percent to 129.87 yen after falling 1 percent on Wednesday. Against the dollar, the common currency tacked on 0.1 percent to $1.3101 ahead of the European Central Bank's policy meeting later on Thursday, approaching a one-month high of $1.3118 it struck in the previous session. The central bank is expected to hold off fresh action. "We see little scope for major policy developments and thus expect the euro to stay in its narrow range," said Chris Walker, analyst at Barclays Capital. Immediate resistance is seen around $1.3140, a level representing the 76.4 percent retracement of its May 1-17 fall. Against the dollar, the Aussie tumbled 1 percent to $0.9438, breaking through stop-loss orders cited by analysts at $0.9450 . It is now on track to test its 2011 trough of $0.9388. It even gave up 0.2 percent against its commodity brethren, the New Zealand dollar, a decline traders say is the ultimate bearish signal, although it held above a 4-1/2 year low of 1.1811 hit on May 29. The Aussie has come under renewed pressure after data on Wednesday showed the economy grew by a weaker-than-expected 0.6 percent in the first quarter. Markets have since shortened the odds of another interest rate cut with debt futures giving a near one-in-two chance of a July rate cut. "For the RBA to completely discount a further rate cut, the Aussie would need to drop to $0.90 or 90 yen, which I think would be difficult... it's a race to see which would happen first," said Murata of Brown Brothers Harriman. Link this Share this Digg this Email Reprints

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