* Dollar index near 4-week high
* Aussie dlr skids to three-year low, more losses seen
* Dollar/yen could test Ichimoku cloud top above Y101
* Focus on central banks' meetings this week, Friday's US
By Wayne Cole and Hideyuki Sano
SYDNEY/TOKYO, July 1 The dollar was broadly firm
on Monday as traders greeted the start of a new quarter that
could see the U.S. Federal Reserve beginning to wind down its
stimulus as early as September, even as other major central
banks are expected to maintain their super-easy monetary policy.
The Australian dollar touched near three-year lows versus
the U.S. dollar, though it managed to stage a modest comeback in
the wake of a less dire-than-expected reading on China's
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 83.136 on Monday.
Against the yen, the dollar rose to a high of 99.55 yen
, a level not seen in nearly four weeks, before giving up
some the gains to trader at 99.26 yen, up 0.1 percent from late
New York on Friday.
"Technically, the dollar/yen seems firmly supported at the
bottom of Ichimoku cloud and it looks like it could test the
cloud top near 101.30 yen," said Bart Wakabayashi, head of forex
at State Street Global Markets in Tokyo.
"The market will focus on the Fed's tapering of stimulus,
unless there's a clear signal from the Fed that it will not be
on the cards this year," he added.
Indeed, Fed Governor Jeremy Stein on Friday highlighted
September as a possible time when the U.S. central bank will
need to consider reducing its bond-buying programme.
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
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, though it has rebounded after
China's manufacturing data turned out to be less dire than
China's official purchasing managers' index (PMI) slipped to
50.1 in June from 50.8 in May, but was above the median forecast
of 50.0. However, a separate private report painted a slightly
gloomier picture of the sector.
"Chinese economic outlook is still uncertain, so Asian
emerging market currencies and the Aussie will remain under
pressure for the time being," said a trader at a Japanese bank.