* Aussie under renewed pressure on RBA Governor comments
* Dollar edges down vs yen after touching 5-week high
* Lower volume on US holiday could lead to volatility
* Expectations of Fed's reduction of stimulus support dollar
By Lisa Twaronite
TOKYO, July 3 The Australian dollar's tentative
recovery unraveled on Wednesday as it skidded to a fresh 3-year
low after the head of the country's central bank said it stands
ready to support an economy shifting to a new source of growth
as its long-run mining investment boom cools.
The U.S. dollar edged lower against the yen after earlier
touching its highest level since late May, as investors
positioned for a U.S. holiday and key jobs data that could
heighten expectations that the Federal Reserve will begin to
reduce its monetary stimulus in the coming months.
Speaking just a day after the Reserve Bank of Australia left
its cash rate unchanged at a record low 2.75 percent, Governor
Glenn Stevens said he was surprised by the resilience of the
Australian dollar, but noted that free-floating exchange rates
"do eventually adjust."
Stevens' comments sent the Aussie plunging as low as $0.9095
, from a session high of $0.9189. It was last down 0.3
percent at $0.9113.
The Aussie has come under heavy selling pressure in recent
weeks as the U.S. dollar rose broadly on expectations the Fed
would soon start to unwind its stimulus, and on slowing growth
in China, Australia's major export market. The RBA's jawboning
and dovish comments have accelerated the currency's fall from
levels of over $1.00 seen as recently as on May 14.
U.S. financial markets will shut early on Wednesday and
remain closed on Thursday in observance of the U.S. Independence
Day holiday. Lower volume could lead to greater volatility,
particularly ahead of Friday's release of the monthly jobs
report for June.
Economists polled by Reuters expect payroll additions of
165,000 jobs last month and a lower unemployment rate of 7.5
The Fed has signaled its intent to begin to consider
trimming its bond-buying stimulus as the U.S. economy improves.
Such expectations have pushed up U.S. Treasury yields, which in
turn have lifted the greenback.
A better-than-expected figure would likely push up both U.S.
yields and the dollar. A disappointing figure would suggest the
central bank will maintain its asset purchases for now, though
some strategists and market participants believe it would not
alter the overall trend toward a stronger dollar.
"Most believe that the Fed is mostly likely to taper at some
point in 2013, so it's kind of like 'heads I win, tails you
lose,'" said Andrew Wilkinson, chief economic strategist at
Miller Tabak in New York.
"You buy the dollar on expectations of strong data, and even
if it's softer, there shouldn't be a resumption of strength in
the yen," he said, with the Bank of Japan committed to
maintaining its dramatic monetary easing to aim for its target
of two percent inflation in two years.
Data on Tuesday backed stimulus-tapering expectations, as
U.S. new motor vehicle sales in June were on track for their
strongest month in more than 5-1/2 years, while factories posted
a second straight month of gains in new orders in May. Home
prices also posted their biggest annual increase in more than
The dollar inched down about 0.1 percent from late U.S.
trade to 100.52 yen after advancing as high as 100.86 yen
early in the session, its loftiest level since May 31. On that
day, it rose as high as 101.27 yen, with the 101-yen level now
seen as a key resistance point and stop-loss orders said to lie
The dollar index held its ground despite the currency
losing its footing against the yen and was steady at 83.557. It
was not far from 83.613 reached on Tuesday, which was its
highest since May 30.
The euro slipped about 0.1 percent to $1.2971,
holding above its Tuesday low of $1.2962, which was its lowest
since June 3.
The European Central Bank is likely to emphasise at its
monthly meeting on Thursday that the euro zone economy still