* Dollar index falls to seven-week lows
* Euro resilient, hits six-week highs despite low CPI
* RBA rate decision and China PMI in focus
By Ian Chua
SYDNEY, July 1 The dollar languished at
seven-week lows against a basket of major currencies on Tuesday,
having extended a month-long decline after a recent batch of
mixed data cast doubts on the strength of the U.S. economic
San Francisco Fed President John Williams said the U.S.
central bank will probably need to keep interest rates near zero
for at least another year, even as he expressed optimism the
economy is on the recovery path.
The dollar index fell as far as 79.759, a low not
seen since May 9, ending a woeful month for dollar bulls that
saw it slump from a four-month peak of 81.020. In June, the
index fell 0.7 percent.
Against the yen, the dollar bought 101.32, not far
from a six-week low of 101.23.
Markets seemed bent on selling the dollar and chose to
ignore optimistic U.S. data showing a jump in pending home sales
to an eight-month high.
"It's been more of the same overnight with further U.S.
dollar weakness, with gains in the GBP, EUR, JPY, AUD, and the
NZD triggered more by momentum and market 'stops' than any
economy fundamental news," said David de Garis, economist at
National Australia Bank in Sydney.
In a move that is sure to displease the European Central
Bank, the euro hit a six-week high near $1.3700. Against
the yen, the common currency climbed to 138.75 as it
continued to recover from last month's trough of 137.70.
The resilience of the common currency sat at odds with data
showing euro zone inflation remained mired at levels seen during
the 2009 recession and that lending to households and firms
slumped in May.
Data on Monday showed euro zone inflation stayed at 0.5
percent in June, far below the ECB's medium-term target of just
below 2 percent. Private sector loans fell 2.0 percent.
While the latest data will keep the pressure on the ECB to
ease further, the central bank is considered highly unlikely to
follow-up on last month's wide-ranging stimulus steps when it
holds its policy meeting on Thursday.
Instead, the bank is seen taking a wait-and-see approach
rather than launching an asset-buying program in the footsteps
of the Bank of Japan and Fed.
In Australia, no policy action from the Reserve Bank is
expected later on Tuesday, with the cash rate seen steady at 2.5
percent. So the focus will be on whether the RBA will renew its
efforts to talk down the local dollar, which remains stubbornly
high above 94 U.S. cents.
The Aussie last traded at $0.9432, having
oscillated around the 94 cent mark for three weeks now.
Resistance at the recent high of $0.9445 and its 2014 peak of
$0.9461 were capping the currency.
Ahead of the RBA's decision at 0430 GMT, China will release
a survey on its vast manufacturing sector at 0100 GMT.
Chinese factory activity is expected to have posted its best
performance this year in June, further signalling the economy is
regaining strength after an unsteady start to 2014.
(Editing by Shri Navaratnam)