* Aussie hits 8-mth highs after RBA sticks to steady rates
* Sterling flirts with six-year highs on upbeat
* Yellen speaks later Wednesday, ECB rate decision & US
By Hideyuki Sano and Ian Chua
TOKYO/SYDNEY, July 2 The British pound held firm
near six-year highs following an upbeat manufacturing survey
while the yen and the euro lost steam as the uptick from
quarter-end buying faded.
Commodity currencies outperformed other major rivals thanks
to high commodity prices and increased risk appetite, reflected
in surging equities worldwide.
Investors warmed to sterling after a survey showing British
manufacturing growing at its fastest in seven months added to
the case for a rise in interest rates this year, well ahead of
the United States.
The pound, which scurried to $1.7167 on Tuesday,
its highest since October 2008, traded firm at $1.7148. A return
to $1.7322 will mark its 50 percent retracement of the late-2007
to early-2009 tumble from $2.1162 to $1.3500.
Sterling also held near a 1-1/2-year high against the euro,
which changed hands at 79.765 pence, near the low of
79.59 set last month.
The euro lost steam partly as quarter-end buying by euro
zone exporters have now been completed, traders said.
The common currency slipped to $1.3677 from a
six-week high of $1.3710 on Tuesday while the dollar index
drifted up to 79.837 from a two-month trough of 79.740.
Traders also said there were some worries among euro bulls
that the European Central Bank (ECB) might try to talk down the
currency on Thursday after its policy meeting.
The euro has gained about 2 U.S. cents in three short weeks,
a move that is likely to frustrate the ECB. President Mario
Draghi recently warned that a strengthening currency in a low
inflation environment was cause for serious concern.
Still, with the ECB unlikely to inject more stimulus a month
after delivering wide-ranging measures, analysts said the euro
shouldn't fall too far.
"On EUR/USD, the medium-term view is still one of a lower
exchange rate given the monetary policy divergence," analysts at
JPMorgan wrote in a note to clients.
The end of quarter-end buying also hit the yen, which
slipped from six-week high to 101.60 yen to the dollar
from Tuesday's low of 101.29.
On the other hand, commodity currencies such as the Canadian
dollar and the Australian dollar flew higher, drawing support
from higher commodity prices, rising risk appetite and their
respective central bank's policy stance.
The Canadian dollar hit a six-month low of C$1.0628 to the
U.S. dollar on Wednesday, helped by recent rise in
"Some real-money investors are buying the Canadian dollar.
It now looks like a good place to be for investors who want to
capitalise on rise in commodities but at the same time who do
not want to increase exposure to emerging markets such as Brazil
or China," said a trader at a Western bank in Tokyo.
Meanwhile, the Reserve Bank of Australia on Tuesday kept
Aussie bears at bay by sticking to its message that rates will
"There were some expectations that the RBA might, if it
wanted to, be more dovish on some sectors of the economy, but
they were not and AUD broke above the year's highs," said Emma
Lawson, senior currency strategist at National Australia Bank in
The Aussie jumped almost a cent to above 95 U.S. cents
for the first time since early November.
It ceded some gains on Wednesday after a surprise widening
in the Australian trade deficit in May due to slump in exports.
The Aussie fetched $0.9456, still up 0.7 percent so far this
With little in the way of major data from Asia, focus will
switch to Federal Reserve Chair Janet Yellen's speech later in
the day on "Financial Stability", at an event hosted by
International Monetary Fund Director Christine Lagarde.
(Editing by Shri Navaratnam)