July 1, 2013 / 12:06 AM / 4 years ago

FOREX-Dollar in poll position ahead of data, central bank events

4 Min Read

* Dollar on a roll given outlook for US economy, yields

* Focus on Chinese data on Monday, Friday's US jobs report

* Aussie dlr skids to three-year low, more losses seen

By Wayne Cole

SYDNEY, July 1 (Reuters) - The dollar was holding broadly firm on Monday after a flood of month-end flows left it well positioned for a week packed with major economic data and central bank meetings.

Manufacturing report from China will get the ball rolling on Monday with the risk that any disappointment will depress currencies across Asia to the benefit of the U.S. dollar.

Friday's report on U.S. payrolls will be even more critical than usual as a upside surprise would only fan speculation about an early start to tapering by the Federal Reserve, likely lifting both Treasury yields and the dollar.

"This week will be huge for bond bears if the payrolls report validates the Fed's decision to lower its unemployment forecasts," noted analysts at JPMorgan.

Rising yields and an improving domestic economy give the U.S. currency a big advantage over the euro and yen where policy is expected to stay super-easy for a long time to come.

That is reflected in the dollar index which hit a four-week peak of 83.344 on Friday, having recovered all the way from a 80.498 trough in just eight sessions. The index was up a shade at 83.211 early Monday.

The dollar also edged up to 99.45 yen, after finishing at a firm 99.17 in New York on Friday.

Dealers reported offers from Japanese exporters but also talk of stop-loss bids above 99.50, with more beyond the psychological 100.00 barrier.

Technically, resistance came in 99.92, the 61.8 percent retracement of the drop from 103.74 to 93.75. Support to be found at the 55-day moving average at 99.12.

Japanese economic news continued its better run with sentiment at big manufacturers improving markedly in the latest Bank of Japan survey. Notable was a big rise in business investment plans.

Yet these are just early days in the BOJ's massive quantitative easing campaign which is set to run for much of the next two years.

Against the euro, the dollar was on top at $1.3010 and angling to test resistance in the $1.2983/2990 area.

The European Central Bank and the Bank of England have policy meetings on Thursday and the former is likely to emphasise that the eurozone economy is in a much different stage of recovery than the United States.

"President Draghi is likely to use the press conference to "speak soft", said analysts at RBC Capital Markets.

"We expect the ECB to continue emphasising that extraordinary accommodative policies will continue, and that it has other options if looser monetary policy is needed."

Also holding a policy meeting this week is the Reserve Bank of Australia (RBA) and, while it is widely expected to hold rates steady at 2.75 percent, analysts suspect it will welcome the recent decline in the local dollar while keeping a bias to ease further.

The Australian currency touched a three-year low of $0.9110 early Monday and traders assume it is only a matter of time before it tests 90 cents.

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