* Dollar index holds near three-year peak
* Euro at three-month lows vs USD & sterling at 3-yr lows
* China trade data next in focus
By Ian Chua
SYDNEY, July 10 The dollar hovered at three-year
highs against a basket of major currencies on Wednesday as
investors took aim at the euro and sterling on growing
expectations that central banks in the euro zone and Britain
will have to keep policy loose for a long time.
The euro last traded at $1.2779, having slid as far
as $1.2755, a level not seen since early April. A break below
$1.2740, the April 4 trough, would pave the way for a test of
$1.2661, the November 2012 low, traders said.
The move came after a European Central Bank policymaker,
Joerg Asmussen, said the central bank's guidance on interest
rates staying at a record low extended beyond 12 months.
The ECB later issued a statement saying Asmussen had not
intended to give any guidance on the exact length of time for
which it expects to keep rates at record lows.
"Although the ECB subsequently clarified and backtracked on
this statement, euro zone policymakers clearly remain in a
dovish mode and keen to keep rate expectations skewed to the
downside," analysts at BNP Paribas wrote in a client note.
Standard & Poor's downgrade of Italy to BBB from BBB-plus on
Tuesday gave investors a further reason to sell the common
Sterling wallowed at three-year lows after surprisingly weak
UK manufacturing data kept alive expectations of more aggressive
monetary easing by the Bank of England. It was at $1.4857
, after falling as far as $1.4814.
The weakness in the euro and sterling helped the dollar
index, which tracks the performance of the greenback against a
currency basket, hit a three-year high at 84.753.
The index was last up 0.1 percent at 84.670, adding
to Tuesday's 0.5 percent rise.
Investors have grown increasingly bullish about the dollar
as recent upbeat data cemented the view that the Federal Reserve
could start scaling back stimulus as early as September.
"Dollar buying will continue. With rising Treasury yields,
there is no incentive to sell the dollar, particularly against
the euro," said Masashi Murata, senior currency strategist at
Brown Brothers Harriman in Tokyo.
"However, against the yen, there is some risk ahead of
Chinese data this week. Any evidence of a slowdown in China will
prompt some people to buy back the yen."
Chinese trade data on Wednesday will be closely watched,
with any more signs of weakness in the world's second-biggest
economy set to weigh on risk appetite.
A standout currency was the Australian dollar, which rose
against a host of currencies, including the greenback, and hit
one-month highs against the euro and sterling.
The Aussie last stood at $0.9166, having briefly
popped above $0.9200 for the first time in a week. The common
currency slid to A$1.3895, forming a double-top on
the charts that suggested further downside. Sterling sagged to