FOREX-Dollar, euro higher ahead of jobs data, ECB

Wed Apr 2, 2014 4:18am EDT

Related Topics

* Dollar just off 10-week high vs yen

* US stocks post record closing high, Tokyo's Nikkei rallies

* US ADP employment report eyed for near-term impact

* Euro resilient as no easing expected from ECB on Thursday (New throughout, changes dateline from prvs SYDNEY/TOKYO)

By Patrick Graham

LONDON, April 2 (Reuters) - The dollar traded close to a 10-week high against the yen on Wednesday, bolstered by expectations of stronger U.S. jobs data over the next few days and by signs Beijing may move to counter a slowdown in China.

The euro also ticked higher. Like the dollar it tends to draw support from prospects of higher world growth and is also supported by expectations the European Central Bank will steer clear on Thursday of any action to ease monetary policy.

The yen, the currency most used by investors as for funding carry trades which borrow in one unit to buy another slightly higher-yielding one, is also weakened by anticipation that the Bank of Japan will have to ease policy further.

Oil prices trading just off 5-month lows and a survey that showed corporate expectations for inflation next year below the BOJ's 2 percent target all added to pressure on the bank when its U.S. counterpart is reining in money-printing.

"We're in an environment where the yen will come under some pressure against the dollar," said Ian Stannard, a currency strategist with Morgan Stanley in London.

"We've had some fairly positive signs out of Asia on growth and that puts the yen on the back foot. China is a factor and if the U.S. data comes in strong that will give the dollar a further boost."

The dollar bought 103.78 yen, after hitting a peak of 103.935 yen, helped by a rally on Tuesday on Wall Street and a rise in U.S. Treasury yields. The euro touched a three-week high of 143.475 yen before retreating a touch.

A rising dollar was this year's big call for many banks and funds in January and most have been disappointed, with a fall off in growth in China and a euro bolstered by returning flows of capital instead the dominant trends.

That looks to be swinging back, however, with U.S. data turning more positive. Non-farm payrolls on Friday are prefaced by ADP job numbers later on Wednesday.

"About the only factor that could thwart the dollar's advance in the short term is a decline by the equity markets. Weaker-than-expected U.S. economic data would cool the equity rally and give the yen a breather," said Junichi Ishikawa, a market analyst at IG in Tokyo.

"However, the global equity rally has legs thanks to receding concerns over Ukraine and China's economic slowdown. Any dip by the dollar on data disappointment could be short lived," he said.

EURO BULLS

The euro was up just over 0.1 percent at $1.3810, well off highs above $1.39 at which this year's rallies have peaked.

Euro bulls are betting the ECB will stand pat on policy on Thursday even as the threat of inflation slipping into deflation mounts.

Data on Tuesday was encouraging with German unemployment falling for a fourth month, while a business survey showed an across-the-board rise in factory output that suggested a more entrenched recovery for the euro zone.

By contrast, recent disappointing Chinese data has investors speculating on more action from Beijing. Reports from Chinese state media that several cities may relax house ownership restrictions sent property stocks surging.

Such stimulus hopes have in part helped support demand for commodity currencies. The Australian dollar hit a four-month high of $0.9310 on Tuesday and last traded at $0.9241.

The Aussie briefly matched a 10-month peak of 95.97 yen set on Tuesday.

The New Zealand dollar consolidated at $0.8600 after reaching a 2-1/2-year high of $0.8702 on Tuesday.

The kiwi fetched 89.26 yen, having scaled a 6-1/2-year high of 89.91 yen on Tuesday. (Additional reporting by Ian Chua and Shinichi Saoshiro Editing by Jeremy Gaunt)

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