* Greenback underpinned by Fed minutes showing wariness
about asset buys
* Dollar index steady after posting biggest one-day gain in
* Sterling remains under pressure; hits lowest since July
By Lisa Twaronite and Ian Chua
TOKYO/SYDNEY, Feb 21 The euro skidded to a
six-week low against its U.S. counterpart on Thursday after
minutes of the Federal Reserve's last policy meeting showed some
policymakers thought the Fed may have to slow or stop buying
bonds before seeing a pick-up in employment.
Strategists and market participants said the euro's move
lower also reflected fundamentals and was a clear correction
after its recent ascent.
"The euro's rise from Jan. 23 to Feb. 1 was not so natural
because the eurozone's economy remains weak, and some countries
like France and Italy have complained about the rising euro,"
said Masashi Murata, a currency strategist at Brown Brothers
Harriman in Tokyo.
"I think the market finally found such negative effects," he
The euro dropped as low as $1.3235, its lowest since
Jan. 10 and well off Wednesday's session high of $1.3434, and
last bought $1.3262, down 0.2 percent. The single currency rose
from a low of $1.3264 on Jan. 23 to a 15-month peak of $1.3711
on Feb. 1.
It broke below initial support at $1.3310, the 38.2 percent
retracement of its November-February rally, and also slipped
below its 55-day moving average at $1.3285.
The greenback also benefited from talk overnight that a
hedge fund had been liquidating large positions in commodities.
It was steady against the yen, holding on to much of its
gains made in the previous session on the Fed minutes. The
dollar last bought 93.50 yen.
The minutes from the January meeting of the Federal Open
Market Committee, the U.S. central bank's policy-setting group,
showed "a number of participants" expressed concern over the
risks of continued asset purchases.
"The FOMC minutes were largely behind the dollar's rise,"
said Mitul Kotecha, Hong Kong-based head of global currency
strategy at Credit Agricole.
As the Fed considers the eventual end of its asset buying,
the dollar stands to gain against the currencies such as Japan,
whose central bank is playing "catch-up" in easing policy, he
The dollar has still gained nearly 8 percent against the
Japanese currency so far this year.
The yen has been the worst performing major currency so far
this year as investors bet on more aggressive policies from the
Bank of Japan to reflate the world's third-biggest economy.
The hawkish impression the minutes left on market sentiment
was mitigated by warnings from other Fed members about the
dangers of ending the bond-buying programme prematurely, but the
greenback was further bolstered by rumours that a large
commodity hedge fund had been forced to liquidate its holdings.
Investors used the minutes and the hedge-fund rumours as a
further excuse to cut bearish dollar positions, driving the
dollar index up 0.8 percent on Wednesday, its biggest
one-day gain in seven months.
The index was last at 81.152, up 0.1 percent, after rising
as high as 81.128, its highest level since Nov. 21.
Sterling remained under pressure after minutes of the Bank
of England's last meeting showed the governor and two other
officials voted to restart buying bonds, suggesting the BOE may
be closer than expected to taking more action.
Sterling marked fresh losses after its plunge in the
previous session, dropping 0.4 percent to $1.5180 after
touching a low of $1.5135, its lowest since July 2010.
The Australian dollar dropped to a more than one-week low of
$1.0230. A break below $1.0227 would take it back to
levels not seen since October.
Australia's central bank governor testifies before
parliament on Friday, a twice-a-year event that is usually
closely watched by investors. Recent comments from the Reserve
Bank of Australia indicated it had switched to a wait-and-see
mode, having already slashed its cash rate by 175 basis points
in the past 15 months to a record low of 3.0 percent.
Investors also will be combing U.S. data later on Thursday
for more signs of a stronger economic recovery. The weekly
jobless claims report, a survey on the manufacturing sector and
home sales are all scheduled for release.