* Euro briefly rises but fails to gain momentum
* Fed Bullard says October tapering possible if data
* Aussie nurses losses, awaits China manufacturing report
By Ian Chua
SYDNEY, Sept 23 The dollar held off a
seven-month trough in Asia on Monday, having found a bit of
support after a top Federal Reserve official suggested there is
a chance the central bank may scale back stimulus next month.
The euro, meanwhile, failed to gain much momentum after a
general election in Germany left Angela Merkel's conservatives
just short of votes needed to rule on their own.
The euro rose around a quarter of a U.S. cent to an early
high of $1.3555 before quickly reversing to $1.3528, flat
from late New York levels. Against the yen, the common currency
was also steady at 134.40, having earlier touched
That left the dollar index little changed at 80.420,
not far from a seven-month trough of 80.060 plumbed last week.
The dollar has fallen more than 2 percent in the past two
weeks, firstly as markets scaled back expectations for any
aggressive pullback from the Fed and after it shocked many by
maintaining its massive stimulus.
Comments from Fed officials last Friday left investors still
unsure of when the tapering will begin, but St. Louis Fed chief
James Bullard kept the door open for an October move, saying it
was possible if inflation and unemployment data warranted it.
"Fresh from wrong footing most with the no-move on tapering,
Friday saw comments by James Bullard put the market back on
guard," strategists at Nomura wrote in a client note.
"Bullard said it was a close decision not to taper and that
the $10 billion was not 'far off' from the action they
Other Fed officials including Dennis Lockhart, William
Dudley and Richard Fisher are due to speak later on Monday.
Dudley is head of the powerful New York Fed and a permanent
voter, so his words carry weight in markets.
One of the notable movers was the Australian dollar, which
has just about reversed all of its post-Fed gains. The Aussie
traded at $0.9378, having fallen from last week's high
Traders said one reason for the pullback in the Aussie was
increased speculation the Reserve Bank of Australia (RBA) will
be forced to cut interest rates in order to keep a cap on the
Indeed, last week's rally in the Aussie saw markets price
back in the risk of a rate cut, with interbank futures implying
around a 40 percent probability of a move by year end.
The Aussie's immediate fortunes hinge on the HSBC's report
on China's manufacturing sector due around 0145 GMT. China is
Australia's biggest export market.
Further evidence that the world's second biggest economy has
indeed pulled out of a slide should be positive for the Aussie,
which is often used as a liquid proxy for China plays.