Reuters: US Dollar Report: FOREX-Dollar near 7-week low, Aussie buoyed by China trade data

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FOREX-Dollar near 7-week low, Aussie buoyed by China trade data Aug 8th 2013, 04:30 Thu Aug 8, 2013 12:30am EDT * Dollar broadly weak as Fed's policy divergence recalculated * Euro helped by German data, BoE forward guidance lifts pound * Yen shows muted response to BOJ's decision to stand pat * Aussie jumps after China trade data beats forecasts By Hideyuki Sano TOKYO, Aug 8 (Reuters) - The U.S. dollar was vulnerable near seven-week lows on Thursday due to festering uncertainty over when the Federal Reserve will begin tapering its stimulus, while the Australian dollar jumped after better than expected trade data from China, Australia's main export market. Although the U.S. dollar had hit a three-year high last month as investors had bet the Fed would be well ahead of other central banks in scaling back its easy money strategy, inconclusive economic data and mixed comments from the Fed in recent weeks have raised doubts over the timing. The president of the Cleveland Fed, Sandra Pianalto, seen as a centrist on policy, said on Wednesday that the U.S. central bank could soon begin reducing the pace of its bond-buying stimulus if recent improvement in the U.S. job market persists. Even though job growth in July was below economists' forecasts, Pianalto focused on recent strength, saying the jobless rate was lower than she had expected. "The market has been driven by speculation about tapering. What people are doing at the moment is to adjust their positions based on policymakers' comments and data," said a trader at a Japanese trading firm. The dollar index broke down to 81.229 on Wednesday, bringing its losses to 4 percent in just a month and raising doubts over whether this was just a fleeting correction in a long-term uptrend. "The fact that the USD cannot rally decisively off this support area of 81.50/30 is concerning us and suggesting that we may be about to see a renewed period of USD weakness," says CitiFX Technicals. A break of its channel support, now at around 81.05 at present, connecting its lows in January and June, could jeorpadise its gradual uptrend so far this year. The euro stood at $1.3335, just under a seven-week high of $1.3347 set on Wednesday, helped by data showing German industry output surged at its fastest pace in nearly two years. Sterling also broke higher against the dollar as investors brought forward expectations of when the Bank of England will raise rates after a news conference by the central bank's head. BoE Governor Mark Carney said on Wednesday future interest rate rises in the UK would not happen until unemployment fell to 7 percent, something seen unlikely for at least three years. But he also introduced what analysts called "knockout clauses", saying the BoE would consider raising rates if there are threats of inflation or financial instability, prompting some investors to price in the risk of a rise from the current 0.5 percent sooner than they had been betting. After the bank's report, overnight indexed swaps priced in a 90 percent chance of a rate hike in three years' time, and some chance of a hike as early as 2015. The pound first fell as far as $1.5205 on the news, only to speed up to a seven-week high of $1.5534 and last stood at $1.5496. The yen also reached a seven-week peak of 96.32 on Wednesday before easing back to around 96.72 in Asian trade on Thursday on rebound in Japanese shares. The yen showed limited reaction after the Bank of Japan kept its policy on hold as expected. The euro bounced back off Wednesday's four-week low of 128.45, last trading up 0.4 percent on the day at 128.92 yen . Still, from one technical perspective, the currency pair seems to be on a shaky ground after it closed below the Ichimoku cloud bottom on Wednesday. Although the euro came back above the cloud bottom, at 128.67 on Thursday, another break below that support should send the strongest bearish signal for the pair in more than a year. The Australian dollar gained after China's exports and imports both beat market expectations, easing worries about a slowdown in Asia's economic powerhouse. The Aussie rose 0.7 percent to $.09055, recovering from damages made earlier by poor Australian employment data. Link this Share this Digg this Email Reprints

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