FOREX-Dollar lower against euro, up against yen on risk appetite

Fri Mar 28, 2014 3:55pm EDT

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* Euro up against dollar on increased risk appetite

* Dollar gains against yen

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By Sam Forgione

NEW YORK, March 28 (Reuters) - The dollar edged lower against the euro on Friday while rising against the yen on greater investor risk appetite after comments from a Chinese official indicated the government could implement more stimulus.

China's Premier Li Keqiang sought to reassure global investors that Beijing was ready to support the cooling economy, saying the government had the necessary policies in place and would push ahead with infrastructure investment.

The comments helped push the euro up against the dollar while weighing on the safe-haven yen. The euro tends to attract buyers during periods of greater risk.

The increased appetite for risk also showed in a rise in the U.S. stock market, although stocks later pared gains, led by a decline in the biotechnology sector.

Hopes for stimulus out of China ramped up risk appetite in the currency market, said Joseph Trevisani, chief market strategist at WorldWideMarkets in Woodcliff Lake, New Jersey.

Traders also said they had doubts as to whether the European Central Bank would implement further monetary easing at its meeting on April 3, despite statements from ECB policymakers on Tuesday hinting at the potential for more easing to prevent deflation.

A Reuters poll showed that only two of 72 economists now predict a rate cut from the ECB at its April 3 meeting, versus 26 of 78 who did before last month's meeting.

Nevertheless, the ECB policymakers' statements weighed on the euro this week, since the monetary easing would weaken the euro currency.

A key statement on Tuesday came from ECB governing council member and Bundesbank chief Jens Weidmann, who said negative interest rates were an option to temper euro strength and that quantitative easing was not out of the question.

The euro was last up 0.07 percent against the dollar, rebounding from an earlier three-week low, to trade at $1.375. The euro was also last up 0.71 percent against the yen at 141.32.

The doubts surrounding a rate cut persisted even as German consumer prices harmonised with other EU countries rose by 0.3 percent on the month and 0.9 percent on the year in March, according to preliminary data from the Federal Statistics Office Friday, which fell below a Reuters forecast.

"It's possible that the ECB surprises us and doesn't do anything," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.

While the euro gained slightly against the dollar on the day, it was well below its weekly high of $1.3877, which it touched on Monday after weak U.S. manufacturing data led investors to take profits in the dollar and favor the euro.

The dollar was last up 0.61 percent against the yen to trade at 102.79. The dollar earlier hit a roughly two-week high against the yen of 102.98. The U.S. dollar index, which measures the dollar against six major currencies, was last up 0.1 percent at 80.195.

Commerce Department data released Friday showing U.S. consumer spending rose 0.3 percent last month after a downwardly revised gain of 0.2 percent in January supported the dollar's gains against the yen. (Additional reporting by Anirban Nag in London; Editing by Sophie Hares and Chizu Nomiyama)

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