Reuters: US Dollar Report: FOREX-Dollar index ends slide, Australian dollar firms on China data

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FOREX-Dollar index ends slide, Australian dollar firms on China data Aug 9th 2013, 15:46 Fri Aug 9, 2013 11:46am EDT * Aussie dollar gains on China output, gains seen fleeting * Dollar finds base after five straight days of losses * Weaker Japan yen expected for at least another year, poll shows * Traders preoccupied with when Fed will start tapering By Julie Haviv NEW YORK, Aug 9 (Reuters) - The U.S. dollar rose from a recent seven-week low against a basket of currencies on Friday as investors bought at cheaper levels, with speculation as to when the Federal Reserve might begin cutting back its monthly bond-buying program dominating market talk. The Australian dollar, meanwhile, rose to its highest in more than a week against the greenback, bolstered by upbeat factory data from China, though strategists warned the Aussie's rebound could be temporary. China, the world's second largest economy, said its factory output rose 9.7 percent in July, beating forecasts, while retail sales jumped 13.2 percent and inflation held steady. The Australian currency rose 1.0 percent to $0.9194 , extending its 1.2 percent gain in the previous trading day on stronger-than-expected trade data from China, Australia's biggest export market. The Aussie has recovered sharply from a three-year low of $0.8848 it touched on Aug. 5. "The lack of pricing pressures allows for further stimulus from Chinese monetary and fiscal authorities, helping to boost investor confidence about growth going forward," said Boris Schlossberg, managing director of foreign exchange at BK Asset Management. "Although this appears to be nothing more than a relief rally within an overall downtrend, the unit (Aussie/dollar) could try to climb toward the '9300 level' over the next few days before hitting any meaningful resistance," Schlossberg said. The Aussie could be vulnerable to a strengthening U.S. dollar as some expect the Federal Reserve to scale back its stimulus program as soon as September. The dollar index last traded up 0.2 percent at 81.118. It had hit a nadir of 80.868 on Thursday, its lowest since June 19. The Reserve Bank of Australia cut its main cash rate to a record low of 2.5 percent earlier this week. In contrast, Fed policymakers have hinted in recent weeks that the U.S. central bank could start to scale back its $85 billion monthly bond-buying in September, but this will depend on further improvement in the job market. Thursday's weekly jobless claims data showed layoffs fell to their lowest since late 2007 . Dallas Fed President Richard Fisher reiterated on Thursday that the central bank remained open to trimming its bond purchases from September if economic data keeps improving, but there was no fresh information due on Friday that would help clarify the situation. "There are some key U.S. indicators next week, including the retail sales, so I think the market will focus on that. If you do get stronger data the dollar should move higher," said Kiran Kowshik, currency strategist at BNP Paribas. The dollar dropped this week as U.S. bond yields eased. U.S. 10-year Treasury yields remain below the highs over 2.70 percent seen before last week's U.S. payrolls data, and the spread between similarly-dated German and Japanese bonds have narrowed in the past few days. That has prompted investors to trim long dollar positions. As a result, the euro hit a seven-week high of $1.3401 on Thursday and was last down 0.2 percent at $1.3348. The currency drew strength from Germany's above-forecast trade surplus on Thursday and its much stronger-than-expected factory data on Wednesday. In Japan, a weaker yen is seen likely for at least a year and how much it eases in the near term will depend on how soon investors expect the Fed to start reducing its stimulus, a Reuters poll found. The poll of over 55 currency strategists, conducted Aug. 7-9, showed the dollar at 98.5 yen in one month, 102 yen in three months and 107 yen in a year, compared with expectations of 100, 102 and 107 yen, respectively, in last month's poll. After hitting a seven-week low of 95.79 yen on Thursday the dollar last traded down 0.4 percent at 96.34 yen, according to Reuters data. Link this Share this Digg this Email Reprints

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