* Uptrend for dollar seen intact on Fed's exit plan
* But dollar may face pullback after recent gains - analyst
* Dollar index firmer, but below Monday's 3-year high
By Masayuki Kitano and Ian Chua
SINGAPORE/SYDNEY, July 9 The dollar inched
higher versus a basket of currencies on Tuesday, and its broad
uptrend was seen intact as the market positions for when the
U.S. Federal Reserve will start to slow its stimulus.
Expectations that the Fed will reduce its bond-buying as
early as September are expected to keep the dollar buoyant,
although there is caution about its near-term outlook in the
wake of recent gains.
"The policy divergences between the Fed and the developed
countries like...UK and Japan are likely to widen over time and
that will continue to favour dollar strength," said Sim Moh
Siong, FX strategist for Bank of Singapore.
In the short term, however, the dollar could retreat as it
approaches technical resistance, he said, adding that he was in
favour of waiting for such a pullback before buying the dollar.
While the Fed is seen heading toward reducing its monetary
stimulus later this year, the European Central Bank has said it
would keep interest rates at record lows for an extended period,
and the Bank of England has indicated that it is in no hurry to
raise interest rates. The Bank of Japan is expected to continue
with its aggressive monetary stimulus.
The dollar index, which measures the greenback's value
against a basket of currencies, edged up 0.1 percent to 84.268
. The dollar index had set a three-year high of 84.588 on
Monday following Friday's upbeat U.S. jobs report.
The euro eased a tad to $1.2861, not too far from a
seven-week trough of $1.2806 hit on Friday.
Sim at Bank of Singapore said the euro has support on
technical charts in the $1.2700 to $1.2750 area.
Traders said the euro faces resistance around $1.2883, the
July 4 intraday low, followed by $1.2923, the July 3 intraday
Against the yen, the dollar edged up 0.2 percent to 101.10
yen. On Monday, the dollar had hit a high of 101.54 yen
on trading platform EBS, its highest level in nearly six weeks.
Earlier, the dollar pushed up to as high as 101.25 yen. A
trader for a European bank in Tokyo said the dollar was buoyed
by stop-loss buying by short-term speculators.
The trader said he expected the dollar to eventually grind
higher, supported by interest to buy the greenback on dips.
BULLISH ON THE DOLLAR
Gains in the dollar, however, could be tempered if there is
any position unwinding in the wake of recent gains. Currency
speculators hugely increased their bets in favour of the U.S.
dollar in the week ended July 2, while turning negative on the
Investors had grown increasingly bullish on the dollar after
the Fed laid out a roadmap for scaling back its asset-purchase
programme as the economy improves.
In contrast, the European Central Bank last week broke with
tradition by declaring it would keep interest rates at record
lows for an extended period, a pledge ECB President Mario Draghi
reiterated on Monday.
"We remain bullish USD versus the currencies where central
banks are signalling continued policy easing, most notably the
EUR, GBP, CHF and JPY," analysts at BNP Paribas wrote in a
"We are more cautious versus the currencies of commodity
exporter economies, where short positioning is generally
stretched and where better U.S. data may provide some cushion
against the negative effects of China's slowdown in the months
The Australian dollar slipped 0.1 percent to $0.9126
, after having set a 34-month trough of $0.9036 last
Investors largely shrugged off data showing inflation in
China quickened in June as they waited for trade figures on