REFILE-FOREX-Dollar slips, but stays above 1-mth low as U.S. yields rise

Wed Jul 24, 2013 11:47pm EDT

Related Topics

* Dollar index eases, but holds above recent 1-mth low

* Greenback slips after bouncing on rise in U.S. yields

* NZD supported, mkt sees hawkish hint in RBNZ statement

By Masayuki Kitano

SINGAPORE, July 25 (Reuters) - The dollar eased versus a basket of currencies on Thursday but stayed above a recent one-month low after a rise in U.S. bond yields reminded investors that the Federal Reserve was still closer to tempering its monetary stimulus than other major central banks.

The dollar index slipped 0.1 percent to 82.208, hovering above a one-month low of 81.926 set on Tuesday.

Against the yen, the dollar slipped 0.2 percent to about 100.09 yen but still held on to most of the gains made on Wednesday, when the greenback firmed 0.8 percent versus the Japanese currency.

Figures out of the United States on Wednesday showed new-home sales jumped to a five-year high in June and an acceleration in factory activity in July, boosting hopes of a third-quarter pick-up in economic growth.

That contributed to a rise in 10-year Treasury yields, which last stood near 2.598 percent, up from Wednesday's intraday low of 2.509 percent.

The dollar's trend has shown a high correlation to yields in recent weeks as the market has focused on when the U.S. Federal Reserve might start tapering its monetary stimulus.

"We're still in summer, relatively thin markets so I wouldn't expect the bounce (in the dollar) to be dramatic from here," said Callum Henderson, global head of FX research for Standard Chartered Bank.

Henderson added, however, that the dollar appeared to be stabilising to some degree after a recent sell-off.

The dollar had retreated in the past couple of weeks after Fed Chairman Ben Bernanke stressed earlier in July that the Fed will continue to pursue an accommodative monetary policy for now and added that the unemployment rate may be overstating the health of the labour market.

The recent pullback in the dollar has helped buoy the euro, which hit a one-month high near $1.3256 on Wednesday after surveys showed a quicker-than-anticipated expansion in German and French private sector business activity.

Yet the recovery remains tentative at best and analysts assume the European Central Bank will keep monetary policy accommodative for some time to come.

The euro last stood at about $1.3208, up 0.1 percent from late U.S. trade on Wednesday.

NEW ZEALAND DOLLAR

Elsewhere, the New Zealand dollar held steady at $0.7980 , up from Wednesday's intraday low of $0.7906.

The kiwi had gained a lift earlier after markets detected a more hawkish tone from the Reserve Bank of New Zealand.

While the central bank reiterated that it expected to keep rates steady through to year-end, it noted that a tightening would likely have to come at some point.

"It was slightly on the hawkish side, relative to expectations," Jane Turner, a senior economist at ASB Bank, said.

"There was a lot more emphasis on the potential inflation spillover from construction costs and housing market," she added. "We still expect the RBNZ to first lift the official cash rate in March 2014."

If that prediction proves correct, New Zealand could well be the first developed nation to begin tightening this cycle.

In contrast, Australia's central bank is still thought likely to cut rates again, and perhaps as early as August given a subdued economy and benign inflation.

As a result, the Aussie slid to its lowest since late 2008 against its New Zealand counterpart at NZ$1.1453.

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