FOREX-Dollar steady as U.S. data awaited for Fed clues
TOKYO, May 31 (Reuters) - The dollar held near a seven-week high against the euro on Thursday as investors awaited a slew of upcoming U.S. data that could further cool expectations for the Federal Reserve to trim interest rates later in the year.
Revised U.S. data on first-quarter growth later in the session precedes a slew of key indicators on Friday, including the May payrolls report and a snapshot of manufacturing activity that will show whether the economy is picking up.
"We expect any knee-jerk FX reactions to be muted ahead of payrolls on Friday," said currency strategists at JPMorgan Chase in a note to clients.
The dollar has clawed back from a record low hit against the euro in April and a 26-year low against the pound as worries about the economy's health have eased, reducing speculation of lower rates that would erode the U.S. currency's yield appeal.
Traders said that with many market players still holding hefty positions favouring the euro and sterling, the dollar may have more room to rebound if the upcoming data proves to be upbeat.
The euro was steady near $1.3430 EUR= after falling to $1.3406 the previous day, its weakest since mid-April. A break of $1.34 would likely trigger a deeper pull-back in the euro, traders said.
The dollar slipped to 121.51 yen JPY= from near 121.60 yen in late New York trade but was still near the 3-1/2-month high of 121.89 yen struck last week.
The single European currency also dipped against the yen to 163.20 yen EURJPY=R from 163.40 yen, holding near the all-time peak of 164.02 yen hit last week.
Minutes from the Fed's May meeting released on Wednesday showed that policymakers felt inflation was their main worry and that growth should recover as the year drags on.
The Fed has held rates steady for nearly a year at 5.25 percent even as investors had expected the housing market troubles to lead to a rate cut, and with the European Central Bank and Bank of England are seen raising rates further.
The yen gave up brief gains made on Wednesday after a 6.5 percent plunge in the Shanghai stock market stoked worries that market players would reverse carry trades funded in the low-yielding yen if the sell-off reverberated to other markets around the world.
But the drop in Shanghai was shrugged off, and the S&P 500 .SPX rose 0.8 percent to hit a record closing high of 1,530. Stock markets around Asia were up about 1 percent in early trade.
