* Euro off lows, steadier after early-week selloff
* Healthy demand at Italy bond sale offset political
* Strong U.S. durable goods orders support risk appetite
* Japan nominates Kuroda as next BOJ chief as expected, no
* Market takes U.S. fiscal spending cuts threat in stride
By Ian Chua and Hideyuki Sano
SYDNEY/TOKYO, Feb 28 The euro held its ground
against the dollar and yen on Thursday, after a relatively
smooth auction of Italian government bonds helped temper
concerns about the country's political deadlock.
Strong U.S. business spending data also boosted investors'
sentiment, easing worries about looming U.S. fiscal spending
cuts and prompting the yen to resume its descent after a brief
spell of sharp gains earlier this week.
"Looking at the U.S. core capital goods orders, there's
absolutely nothing unhealthy in it. It shows American businesses
do not seem to worry about the spending cuts. Considering that,
there will be limited downside in the dollar/yen," said Hideki
Amikura, head of forex at Nomura Trust Bank.
The common currency edged up 0.1 percent to $1.3147,
having pared more than four fifths of the losses it had made
after the inconclusive Italian elections, which had taken the
currency down to an eight-week trough of $1.3018 on Tuesday.
Technically, the single currency has managed to keep holding
above an important chart support, the bottom of the daily
Ichimoku charts, a break of which would have flashed a major
bearish signal for the currency.
Against the yen, the euro rose 0.2 percent on the day to
121.40 yen, inching further up from a five-week low
of 120.20 yen set on Monday.
A sale of Italian government bonds on Wednesday drew solid
demand, helping soothe jitters that the political deadlock could
destabilise Europe's second-biggest sovereign debt market.
The euro was unfazed by diminishing hopes of a coalition
government -- and an increasing chance of new elections -- in
Italy, with two most likely coalition options appearing to fall
Anti-establishment 5-star Movement boss Beppe Grillo slammed
the door on overtures from the centre-left leader Pier Luigi
Bersani while Bersani's junior coalition partner ruled out an
alliance with former prime minister Silvio Berlusconi's
While uncertainty on Italy could cap the euro, some market
players say the euro's recovery in the past couple of days
suggested most investors do not regard the latest political
turmoil in Rome as a major threat to Italy's debt financing.
The steadier euro, for now, saw the dollar index
retreat from a six-month high of 81.948 reached earlier in the
week. It was last at 81.530.
On the yen, the dollar was a tad firmer at 92.35,
having found its footing after Monday's slide to 90.85.
The yen showed no reaction after Japan's prime minister
nominated, as expected, Asian Development Bank President
Haruhiko Kuroda as BOJ governor and Kikuo Iwata, an academic, as
one of the two deputy governors.
The parliament is expected to approve the nominations,
clearing the way for the central bank to unveil fresh easing
steps in April, either at their first policy review on Apr 3-4,
or the following one on Apr 26.
Expectations of more aggressive easing had prompted
investors to push the yen down to a 33-month low of 94.77 yen
per dollar on Monday, which marked a 16 percent fall since
"The market will need a bit of consolidation after such a
long period of one-way falls in the yen. But there's no denying
that the yen is in a downtrend in a longer term," said Nomura
"I expect the yen to drop more in April, as the market will
bet on fresh monetary easing at the BOJ's meeting at the end of
April," Amikura added.
The dollar outperformed its Japanese counterpart even after
Federal Reserve Chairman Ben Bernanke again defended the central
bank's forceful easing of monetary policy.
Bernanke, facing a congressional panel for a second day,
also downplayed signs of internal divisions, saying the policy
of quantitative easing has the support of a "significant
majority" of top central bank officials.
The dollar was also propped up by data showing planned U.S.
business spending recorded its largest increase in more than a
year in January.
The dollar has so far weathered the threat from sharp U.S.
fiscal spending cuts, known as "sequestration", which analysts
estimate will cut U.S. growth by about 0.5 percent.
The automatic spending cuts of $85 billion look increasingly
likely to start as scheduled on Friday, with U.S. President
Barack Obama and Republican congressional leader nowhere near a
deal to avoid them.
"I guess the market is calm partly because payroll tax hikes
that started earlier this year haven't so far done much damage
to risk appetite," said Teppei Ino, currency analyst at the Bank