FOREX-Dollar hurt by doubts about growth momentum; Aussie hits 2014 high

Mon Mar 24, 2014 7:18pm EDT

Related Topics

* U.S. dollar down against major currencies

* Latest U.S. data fails to back up last week's USD rally

* Aussie hits 2014 high, eyes on RBA speech

By Ian Chua

SYDNEY, March 25 (Reuters) - The U.S. dollar nursed broad losses early on Tuesday, having come under pressure late in New York as investors bought the euro and drove the Australian dollar to its highest this year.

Some analysts pointed to a disappointing industry survey, which showed U.S. manufacturing activity slowed in March, as one reason for the dollar's weakness.

The greenback initially held its ground after financial data firm Markit said its preliminary U.S. Manufacturing Purchasing Managers Index slipped to 55.5 from 57.1 in February.

But it later yielded to pressure with the dollar index slipping to 79.934 from a session high of 80.290, pulling away from a three-week peak of 80.354 set last Thursday.

Investors had bought the greenback last week after new Federal Reserve chair Janet Yellen suggested the possibility of raising interest rates early next year.

But traders said the rally was always going to need backing up from strong U.S. economic data.

Sadly for dollar bulls, recent data have not been convincing enough despite the fact they offered hope that the world's biggest economy was picking up momentum after a weather-induced slowdown.

"Even with the move down in the headline (PMI reading) in March, it remained pretty solid and many of the underlying details also looked strong in March," analysts at JPMorgan wrote in a note to clients.

"This reinforces our contention that U.S. data should be more supportive of higher US Treasury rates and hence the USD as weather effects and inventory distortions fade."

The setback for the dollar was a boon for the euro, which regained its footing after having been thwarted by a survey that showed growth in Germany's private sector slowed in March.

The common currency climbed as far as $1.3877 from a low of $1.3760. It last traded at $1.3837, moving back within striking distance of a 2-1/2 year peak of $1.3967 set recently.

Against the yen, the dollar eased to 102.23 from Monday's high of 102.65, while the euro edged up to 141.45 from a low of 140.72.

The Australian dollar was another standout performer, rising to $0.9150, a high not seen since mid-December. It last stood at $0.9130.

The foray above its recent peaks of $0.9135, $0.9136 and $0.9138 were all bullish technical signals that suggested further upside for the currency.

That may trigger a fresh round of verbal campaigning against the Aussie from central bank officials. The Reserve Bank of Australia (RBA) has long said the local dollar is historically high and that a lower currency would help rebalance the economy.

RBA Deputy Governor Philip Lowe is due to speak later in the day on 'Opportunities and Challenges for Market-based Financing' but will no doubt be asked about the strength of the currency.

Governor Glenn Stevens speaks in Hong Kong on Wednesday.

There is little in the way of major economic news out of Asia on Tuesday, leaving the yuan again on many investors' radar screens.

On Monday, the Chinese currency posted its biggest gain in nearly 30 months on speculation the Chinese government would unveil stimulus measures to support the economy.

Just last week, the yuan suffered its biggest weekly drop after the central bank stepped up efforts to shake out hot money from the market.

The wild swings in the yuan have unsettled some investors already fretting over news of a domestic bond default and slowing economic growth.

U.S. President Barack Obama has urged Chinese President Xi Jinping to move his country's currency toward a more flexible, market based-exchange rate. (Editing by Shri Navaratnam)

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A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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