FOREX- Dollar wobbles, on track for half-year loss vs yen

Mon Jun 30, 2014 1:36am EDT

Related Topics

* Dollar index languishes near one-month lows

* Non-farm payrolls on Thursday key to dollar outlook

* RBA and ECB policy meetings also in focus this week

By Lisa Twaronite and Ian Chua

TOKYO/SYDNEY, June 30 (Reuters) - The dollar remained near a more than one-month low against a basket of major currencies on Monday, after a batch of disappointing U.S. data last week gave investors no reason to expect higher U.S. interest rates anytime soon.

The dollar index was last at 80.042, steady on the day and not far from 80.014 touched on Friday, a level not seen since May 21. It posted its biggest weekly fall in over two months, and was on track for a flat half-year performance.

The dollar drifted down 0.1 percent to 101.31 yen, marking a fresh 5-week low of 101.26 yen earlier.

"Most people said the U.S. dollar should be stronger than the yen in the first half of the year based on higher Treasury yields," said Masashi Murata, currency strategist at Brown Brothers Harriman in Tokyo, but those expectations did not materialize and the pair has stuck to a narrow range between 100 and 103 yen in recent months.

Last week, the dollar closed below its 200-day moving average against the yen on a weekly basis for the first time since before Prime Minister Shinzo Abe was elected, Murata said.

"Some people might try to sell the dollar/yen more," he said, in light of the bearish technical signal.

Last week's setback in the dollar came as investors downgraded their U.S. growth forecasts after data showed a surprisingly deep contraction in the first quarter and soft consumer spending.

The value of the dollar's net long position slipped to $11.34 billion in the week ended June 24, from longs of $12.19 billion the previous week, according to data from the Commodity Futures Trading Commission released on Friday. Net U.S. dollar longs have declined for a second straight week.

The downbeat economic data pressured U.S. Treasury yields, which in turn soured the appeal of the dollar. The benchmark 10-year yield stood at 2.532 percent in Asia on Monday, after plumbing a one-month low of 2.507 percent on Friday.

Dollar bulls are now counting on the closely watched non-farm payrolls due this week to provide evidence that the U.S. economic recovery is still intact.

The jobs report will be released on Thursday, a day earlier than usual because of the July 4 public holiday. Analysts polled by Reuters on average expect a non-farm payrolls gain of 210,000 for June versus 217,000 in May.

"Strong U.S. jobs growth and declining unemployment are likely to support our view for the USD to outperform most other currencies in G20 over H2," analysts at Barclays wrote in a note to clients. They have an above-consensus forecast of 250,000 non-farm jobs gains in June.

Also in focus this week is the European Central Bank's (ECB) policy meeting on Thursday, although expectations are low for any follow-up action to the bank's dramatic steps earlier this month. The ECB unleashed a far-reaching package of measures to keep the euro zone economy from slipping into a Japan-style deflation.

Data on Friday showing German inflation quickened in June, potentially pushing up the overall euro zone rate, was seen as alleviating pressure on the ECB to take further steps.

Annual inflation in Germany, harmonised to compare with other European Union countries, accelerated to 1.0 percent from 0.5 percent in May. Euro zone inflation figures are due later on Monday.

For now, the euro was slightly down on the day against the greenback at $1.3643, but still not far from a 2-1/2 week high of $1.3652 set on Wednesday. But it was on track for a loss of 0.7 percent in the half-year period.

Against the yen, the euro inched down about 0.1 percent to 138.21, well within June's 137.70-140.10 range.

In Australia, the central bank will hold a policy meeting on Tuesday and is widely expected to keep its cash rate steady at a record low 2.5 percent, where it has been since August 2013.

Markets are keen to see if the Reserve Bank of Australia will renew its efforts to talk down the stubbornly high Australian dollar.

The Aussie last traded at $0.9419, down about 0.1 percent, but not far from a two-month high of $0.9445 set on June 23 and its 2014 peak of $0.9461 reached in April. (Editing by Simon Cameron-Moore)

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