* Yen benefits from continued fears of China credit crunch
* China still a focus even after PBOC tries to allay credit
* Dollar remains well supported on Fed's exit plan
By Lisa Twaronite
TOKYO, June 26 The dollar turned down against
the yen in Asia on Wednesday as investors warily watched China's
stressed markets, but the greenback got support from U.S.
economic data which backed the Federal Reserve's recovery view
and bolstered U.S. Treasury yields.
"Dollar strength as U.S. bond yields rise is generally the
bigger picture at the moment, certainly after last night's
stronger U.S. data," said Sue Trinh, senior currency strategist
at RBC Capital Markets in Hong Kong.
"But dollar-yen is bucking that dollar-rally trend, as Asian
stock markets have not fully benefited," as they remain focused
on the potential credit crunch in China, she said.
Markets in Shanghai continued to slip, and Japan's Nikkei
share average also gave up its gains and ended down 1
While China's central bank pledged to prevent any lasting
credit crunch, mainland stocks kept slipping as investors braced
for tougher conditions in the world's second-largest economy.
The dollar index, which tracks the U.S. unit against a
basket or rivals, rose slightly to 82.590 , down
from an earlier high of 82.723 but holding well above Tuesday's
low of 82.241. On Monday, it hit a nearly three-week high of
The dollar was slightly lower against the yen compared with
late U.S. trade, buying 97.51 yen after earlier rising to
a high of 98.23 yen. That was shy of Monday's two-week high of
98.70 yen but remained above Tuesday's low of 96.95 and well
away from this month's trough of 93.78 hit on June 13, according
to Reuters data.
Tuesday's U.S. data showed strong gains in business spending
plans and a solid rise in house prices.
Last week, Fed Chairman Ben Bernanke said the central bank
could start to taper its bond-buying stimulus later this year if
the economy continued to recover as it expected.
Still to come this week are remarks from New York Fed
President William Dudley on Thursday, followed by Cleveland Fed
President Sandra Pianalto, Board Governor Jeremy Stein and San
Francisco Fed President John Williams on Friday.
The central bank officials' speeches could suggest that the
message Bernanke sent was misinterpreted, which could cool
market volatility to a degree and slow recent dollar
appreciation, strategists at Citigroup said in a note to
But many market participants said the improving data likely
speaks louder than anything the officials can muster.
"As long as U.S. data are improving, the dollar will rise,"
said an advisor at a foreign exchange market research firm in
Later on Wednesday, the U.S. Commerce Department is set to
release its final estimate of first-quarter gross domestic
product at 1230 GMT. Economists in a Reuters survey forecast a
2.4 percent annualised pace of growth, a repeat of the
preliminary first-quarter reading.
The euro edged down to $1.3073 from Tuesday's session
high of $1.3151, bringing into view chart support at $1.3034, a
level representing the 61.8 percent retracement of its May
17-June 19 rally.
The common currency was further hampered by comments from
European Central Bank President Mario Draghi, who said the bank
was nowhere near exiting its accommodative monetary policy.
The diverging policy views between the ECB and the Fed could
weigh on the euro against the dollar, traders said.
Commodity currencies initially lost ground against the
dollar, although the Australian dollar showed signs of finding a
bottom following its 11-percent drop since May.
The Aussie has been further undermined by efforts by
China, Australia's single biggest export market, to cool down
But the Australian unit found some comfort in comments by
China's central bank on Tuesday, when it assured markets it
would provide cash to institutions that need it.
The Aussie rose about 0.1 percent to $0.9263, after
ending almost flat on Tuesday.
Still, it remained within touching distance of a 33-month
low of $0.9145 reached on Monday, according to Reuters data.
Initial support is seen at $0.9143, the 38.2 percent retracement
level of its 2008 to 2011 rally.