FOREX-Dollar hits 7-week low, Aussie jumps on China data
* Dollar broadly weak as Fed's policy divergence recalculated
* Euro helped by German data, BoE forward guidance lifts pound
* Yen shows muted response to BOJ's decision to stand pat
* Aussie jumps after China trade data beats forecasts
By Hideyuki Sano
TOKYO, Aug 8 (Reuters) - The dollar slid to a seven-week low on Thursday as uncertainty over when the Federal Reserve might begin reducing its stimulus weighed on prospects for bigger yield advantages, while the Australian dollar jumped after strong July trade numbers from China, Australia's main export market.
Although the U.S. dollar had hit a three-year high last month as investors had bet the Fed would be well ahead of other central banks in scaling back its easy money strategy, inconclusive economic data and mixed comments from the Fed in recent weeks have raised doubts over the timing.
"The market has been driven by speculation about tapering. What people are doing at the moment is to adjust their positions based on policymakers' comments and data," said a trader at a Japanese trading firm.
"I wish there's clearer message from the Fed. It seems as if the Fed is trying to pass the ball but no one can catch it," he added.
On Wednesday, the president of the Cleveland Fed, Sandra Pianalto, seen as a centrist on policy, said that the U.S. central bank could soon begin reducing the pace of its bond-buying stimulus if recent improvement in the U.S. job market persists.
The dollar index dropped to 81.167, bringing its losses to 4 percent in just a month, raising doubts over whether this was just a fleeting correction in a long-term uptrend, according to technical analysts.
A break of its channel support, now at around 81.05, connecting its lows in January and June, could jeopardise the gradual uptrend seen so far this year.
The euro rose to a seven-week high of $1.3353 as the common currency also benefited from data showing German industry output surged at its fastest pace in nearly two years.
Sterling also broke higher against the dollar as investors brought forward expectations of when the Bank of England will raise rates after a news conference by the central bank's head.
BoE Governor Mark Carney said on Wednesday future interest rate rises in the UK would not happen until unemployment fell to 7 percent, something seen as unlikely for at least three years.
But he also introduced what analysts called "knockout clauses", saying the BoE would consider raising rates if there are threats of inflation or financial instability, prompting some investors to price in the risk of a rise from the current 0.5 percent sooner than they had been betting.
After the bank's report, overnight indexed swaps priced in a 90 percent chance of a rate hike in three years' time, and some chance of a hike as early as 2015.
The pound first fell as far as $1.5205 on the news, only to rebound to a seven-week high of $1.5534 and it last stood at $1.5496.
The yen also reached a seven-week peak of 96.165 per dollar . The yen showed no immediate reaction after the Bank of Japan kept its policy on hold as expected.
The euro also dropped to one-month low of 128.34 yen and from one technical perspective, the currency pair seems to be on a shaky ground after it closed below the Ichimoku cloud bottom on Wednesday.
Although the euro came back above the cloud bottom, at 128.67 on Thursday, another break below that support should send the strongest bearish signal for the pair in more than a year.
The Australian dollar gained after China's exports and imports both beat market expectations, easing worries about a slowdown in Asia's economic powerhouse.
The Aussie rose 0.9 percent to $.09073, recovering from declines suffered after the earlier release of poor Australian employment data.
- Housing, jobs data weaken, but overall economic picture still upbeat
- Target cyber breach hits 40 million payment cards at holiday peak |
- 'Duck Dynasty' anti-gay fallout sparks debate on religion, tolerance
- UPDATE 3-Saab wins Brazil jet deal after NSA spying sours Boeing bid
- Zuckerberg to sell Facebook shares worth about $2.3 billion |