FOREX-Dollar hits 1-month high vs yen, buoyed by rising yields
* Dollar extends gains vs yen as UST yields rise
* Stop-loss buying lifts dollar to 1-mth high vs yen
* More U.S. data coming up later on Thursday
By Masayuki Kitano
SINGAPORE, Aug 16 (Reuters) - The dollar hit a one-month high against the yen on Thursday, extending gains after this week's upbeat U.S. data gave a boost to Treasury yields and cooled expectations of monetary easing by the Federal Reserve.
The dollar rose on stop-loss buying, adding to a rally that began earlier in the week after strong retail sales data bolstered the view that a recent slowdown in U.S. growth will prove temporary.
The greenback touched a high of 79.19 yen on trading platform EBS, its highest level since mid-July. The dollar last changed hands at 79.18 yen, up 0.3 percent from late U.S. trade on Wednesday.
"We are seeing increasing signs of stabilisation in the U.S.," said Callum Henderson, global head of FX research for Standard Chartered Bank in Singapore.
"The U.S. improvement is in contrast to the persistent weakness elsewhere. So that's dollar positive because (interest) rate spreads move in favour of the dollar," he said, adding that the dollar may rise towards 80 yen in the short term.
Data on Wednesday showed that U.S. industrial output rose in July, while home-builder sentiment in August hit its highest level in more than five years.
Such data came in the wake of a surprisingly strong reading on U.S. retail sales that dampened expectations for the Fed to launch another round of bond-buying, or quantitative easing, as early as September.
Analysts warned, however, that the dollar's rise versus the yen could lose steam if forthcoming U.S. indicators disappoint.
EVENT RISK IN SEPTEMBER
Not all of the data released on Wednesday was rosy, with a gauge of manufacturing in New York state showing a contraction in August for the first time since October 2011.
"It's too early to celebrate with both hands in the air," said Daisuke Karakama, market economist for Mizuho Corporate Bank in Tokyo.
The weak reading on manufacturing in New York state came ahead of the Philadelphia Fed's gauge of factory activity in the mid-Atlantic region due later on Thursday.
"I think corporate sentiment provides the best gauge of current conditions...You have to think about what might happen if the Philly Fed index turns out to be weak. That could change the trend again," Karakama said.
In any event, the dollar will find it tough to break above the 79.50 yen to 80.00 yen region unless there is another strong catalyst, given the potential for dollar-selling by Japanese exporters at such levels, Karakama added.
The euro held steady at $1.2287, with moves subdued as investors await details on a new European Central Bank scheme to help reduce the borrowing costs of Spain and Italy that the central bank is now considering.
"Euro/dollar is in a range for now but we still expect it to move lower in September on the prospect of more headlines out of Europe, a lot of event risk in September, and rate cuts as well," said Henderson at Standard Chartered.
"Our forecast for euro/dollar is $1.18 by the end of the quarter," he added.
A Reuters poll in early August showed that the European Central Bank is seen likely to begin purchasing Italian and Spanish bonds in September, and to also cut its main refinancing rate to a new record low of just half a percent at that time.
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