FOREX-Dollar slips to 6-week lows on yen, euro ticks up

Tue Aug 6, 2013 8:09pm EDT

Related Topics

* Yen broadly firmer in technically-driven trade

* Sterling steady as market awaits BoE's forward guidance

* NZ dlr relieved as dairy sale draws strong demand

By Wayne Cole

SYDNEY, Aug 7 (Reuters) - The dollar slipped to six-week lows against the yen on Wednesday while the euro had another go at chart resistance in what dealers described as largely technical trading amid very thin summer markets.

The dollar came under early pressure as a break of 97.50 yen sparked stop-loss selling taking it to 97.21, its lowest since late June. Dealers said there was no particular event behind the move though there was talk of heavy US bond redemptions due this month.

The next support target was at 96.75/85, a low from June 25 and the 61.8 percent retracement of the move from 93.75 to 101.55.

The yen has for a while been trading inversely to Japanese shares, so a fall in the Nikkei could see the currency extend its gains.

The dollar index was down at 81.579, and threatening support at the July low of 81.407. Likewise, the euro crept higher to $1.3314 but faces stiff resistance in the $1.3323/44 range that has capped it for the past week or so.

Uncertainty about when the U.S. Federal Reserve would begin rolling back its stimulus has kept dollar bulls at bay in recent days.

Below-forecast U.S. jobs data last Friday had prompted investors to push back expectations that the Fed begin slowing its bond-buying stimulus of $85 billion per month as early as September. The Fed's asset-purchase program is seen as negative for the dollar as it is tantamount to printing money.

Data out on Tuesday showing a marked narrowing in the U.S. trade deficit were largely ignored even though they pointed to a sizable upward revision to economic growth for the second quarter.

Yet news of a surge in factory output in Britain and Germany was cited as supporting the euro and sterling, suggesting the economic outperformance of the US is largely priced in now.

The pound faces a major test later Wednesday when Bank of England Governor Mark Carney is expected to offer forward guidance on how long policy will stay super-easy.

"We see risks that the tone of Carney's press conference is more dovish than expected," said analysts at JPMorgan in a note.

"Beyond any knee-jerk rally, the upshot may well be a more extended period of glorified range-trading for the pound - growth is too strong for the currency to weaken, while the BoE could well be too resolute and effective in anchoring forward rates expectations for it to appreciate."

The pound was steady at $1.5349 on Wednesday having repeatedly failed to clear resistance in the $1.5400/33 zone.

The New Zealand dollar was one of the better performers thanks in part to strong demand at Fonterra's latest dairy auction. The country's biggest firm sold almost 60 percent more product than the previous auction, and the highest amount in more than three years.

The sale countered fears that a botulism scare in recent days tied to some of Fonterra's products might dent demand for dairy, New Zealand's single biggest export earner.

The kiwi dollar was up at $0.7906 on Wednesday, a sharp turnaround form the $0.7670 lows touched briefly on Monday.

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