FOREX-Euro stabilises for now but seen shackled by ECB prospects

Mon May 12, 2014 8:25pm EDT

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* Euro steadies but having broken below channel support

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* Yen at 1-week low on improved risk sentiment

* Aussie eyes budget, China data

By Hideyuki Sano

TOKYO, May 13 (Reuters) - The euro stabilised near one-month lows against the dollar on Tuesday, although it remains under pressure as investors expect the European Central Bank to try to limit its longer-term strength in a bid to boost the euro-zone economy.

The euro fetched $1.3755, near its one-month low of $1.3745 hit on Friday, having fallen 1.2 percent since ECB chief Mario Draghi said the bank was ready to take action next month to lift economic growth.

"Its easing may not end in June. The euro's uptrend since last summer is likely to have ended," said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

Uno noted that the euro had broken below a channel of support connecting its July 2013 low of $1.2755 and February low of $1.3482.

Still, the euro zone's disinflationary price trend supports the euro against currencies with higher inflation, so the euro is likely to be supported around $1.35 for now, putting the currency in a range, he added.

Against sterling, it stood at 81.56 pence, having hit a 16-month low of 81.43 on Monday as the British currency is buoyed by prospects of future rate hikes by the Bank of England as the British economy gains momentum.

Data from retailers showed British retail sales jumped in April as rising house prices encouraged shoppers to buy new furniture, flooring and other home decor over the Easter holiday weekend.

Sterling also regained its footing against the dollar, having risen to $1.6869 from a one-week low of $1.6832 hit on Friday.

The yen ticked down to a one-week low against the dollar as improved risk sentiment sent U.S. share prices to record highs.

The yen traded at 102.22 yen to the dollar.

The Australian dollar treaded water at $0.9359, little changed over the past couple of sessions, ahead of the Australian government's 2014/15 budget and a raft of Chinese economic data later in the day.

China's industrial output and fixed assets investment is expected to have stabilised in April. Retail sales growth is also seen flat from March at 12.2 percent. (Editing by Stephen Coates)

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