FOREX-Dollar remains pressured by downbeat durable goods data

Thu Apr 25, 2013 2:26am EDT

Related Topics

* ECB interest rate cut next week seen possible, but not a
given
    * Japan Ministry of Finance data shows Japan capital outflow
last week
    * Australia, New Zealand markets closed for holidays

    By Lisa Twaronite
    TOKYO, April 25 (Reuters) - The dollar remained well shy of
the 100-yen mark on Thursday, still nursing the effects of soft
U.S. durable goods orders data, as shortcovering pushed the euro
off lows hit in the wake of the previous session's disappointing
German Ifo report.
    Orders for durable goods marked their biggest drop in seven
months in March. 
    "Markets overall have been focused on earnings, but poor
data in the U.S. is raising concerns about the U.S. outlook,"
said a foreign exchange market advisor at a Japanese firm in
Tokyo.
    The dollar skidded against its Japanese counterpart late in
the Asian session, down about 0.4 percent to 99.12 yen.
That helped pull the dollar index, which measures it
against a basket of currencies, down 0.4 percent to 82.727. The
index rose as high as 83.190 on Wednesday, its highest since
April 4.
    On Wednesday, the Munich-based Ifo think tank's survey of
German business sentiment showed its second straight monthly
drop in April. That heightened fears about the outlook for the
euro zone's largest economy and added to speculation that the
European Central Bank will cut rates soon. 
    The downbeat Ifo survey came on the heels of German
purchasing managers' index data on Tuesday, which showed a sharp
drop in business activity. 
    But some market participants said that despite the recent
weak data, a rate cut by the ECB to its already record-low 0.75
percent at its meeting next week is far from a given.
    "Of course the ECB will consider cutting rates, but it also
could discuss how to spread the monetary easing effects to other
countries like Spain or smaller countries," said Masashi Murata,
senior currency strategist at Brown Brothers Harriman in Tokyo.
    "There also strong demand for sovereign bonds of countries
like Spain and Italy, and that could also support the euro," he
said.
    Recent comments suggest that some central bank members are
likely to consider other options besides cutting interest rates,
such as loan programmes, he said.
    The ECB has room to act on interest rates if economic
conditions remain weak, ECB Vice President Vitor Constancio said
on Wednesday. 
    The euro added about 0.2 percent to $1.3042, moving
further away from a two and a half week low of $1.2954 tapped 
on Wednesday.         
    Against the yen, the euro slipped about 0.2 percent to
129.28 yen, still well above its overnight low of
128.78 yen but off a session high of 129.90 yen. 
    
      
    The U.S. unit hit a four-year high of 99.95 yen on the EBS
trading platform on April 11, a week after the Bank of Japan
unveiled its radical monetary stimulus programme. 
    In recent sessions the dollar has been flirting with the
100-yen level -- above which it last traded in April 2009 -- but
options barriers have thwarted every attempt to breach it so
far.         
    "My view on that 100 level is that it's just a number. The
bigger issue is what happens after it breaks, and whether it's
sustainable," said Sue Trinh, senior currency strategist at RBC
in Hong Kong.
    Data on Thursday from Japan's Ministry of Finance on weekly
capital flows showed that Japanese investors remained net
sellers of foreign bonds, unloading a net 862.6 billion yen in
the week to April 20.  
    Investors have been closely watching flows data in recent
weeks for any indication that the BOJ's massive stimulus
unveiled on April 4 has pushed Japanese investors to seek higher
returns overseas, which would usher in further yen weakness.
Major Japanese life insurers have recently expressed caution
about shifting funds into foreign bonds.
    Looking ahead, the BOJ will update its forecasts after its
policy meeting on Friday from which no new major monetary steps
are expected. Investors will see whether BOJ Governor Haruhiko
Kuroda's two-year time frame to hit a 2 percent inflation target
will become the bank's official forecast, even though many
analysts believe such a prediction might be too optimistic and
could put the bank's credibility on the line.  
    Also Friday, U.S. gross domestic product data are expected
to show the economy grew at a 3.0 percent annual pace in the
first quarter, accelerating from a 0.4 percent rate in previous
period, though economists predict the pace has since slowed to
around 1.5 percent in the current quarter. 
    With markets in Australia and New Zealand closed for public
holidays, regional liquidity was thinner than usual, market
participants said.
    The Australian dollar was about 0.3 percent higher against
the greenback at $1.0307, after hitting a nearly
one-week high of $1.0322. It moved away from a 6-week low of
$1.0219 struck on Tuesday after a weak reading on the Chinese
manufacturing sector.
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