* Yen posts modest losses vs dollar, euro
* Focus on U.S. consumer prices data later in session
* Aussie posts modest gain after RBA Stevens speech
(Updates Australian dollar move)
By Shinichi Saoshiro
TOKYO, July 22 The yen dipped against the dollar
and euro on Tuesday on a slight reduction in
geopolitically-inspired risk aversion that lifted equities
Still, markets were unable to fully shake off geopolitical
concerns as tensions in the Ukraine and Gaza remained high,
keeping the dollar and euro in a narrow corridor against the
"Geopolitical developments channelled through higher oil
prices will remain key theme this week," said Shinichiro Kadota,
chief FX strategist at Barclays Bank in Tokyo.
"Heightened geopolitical risk accompanied by higher oil will
help the yen and Swiss franc appreciate while weighing on the
Australian and New Zealand dollars. Emerging market currencies
from Taiwan, Singapore, Korea, Thailand and India are also
vulnerable to higher oil," he said.
Oil prices have risen as the threat of escalating tension
between Russia and the West over the crisis in Ukraine mounted,
with U.S. crude surging to a three-week high on
The euro edged up 0.1 percent to 137.25 yen after
crawling back from a five-month trough of 136.71 yen hit late
last week when a Malaysian airliner was downed over Ukraine and
an Israeli ground offensive in Gaza began.
Against the dollar, the common currency was effectively flat
at $1.3525 after recovering from a five-month trough of
$1.3491 touched on Friday.
The dollar crept up 0.1 percent to 101.48 yen, having
pulled back from a low of 101.09 hit late last week.
"Although caution towards the yen garnering bids remains,
the overall trend is dollar-supportive, with the Federal Reserve
poised to exit monetary easing eventually," said Junichi
Ishikawa, market strategist at IG securities in Tokyo.
"Dollar/yen could gain further upward momentum if it goes
above the 21-day moving average (at around 101.60) as that would
trigger rounds of short covering. But it is likely to face
resistance at 102.00, where dollar-selling orders by Japanese
exporters are said to be lined up," he said.
Aside from geopolitical developments, participants kept an
eye on the U.S. consumer prices data due at 1230 GMT. Focus was
on whether the dollar would react if the data proved strong
enough to raise expectations for accelerated monetary tightening
by the Federal Reserve.
The Labor Department is expected to report that U.S.
inflation pulled back to a month-on-month rise of 0.3 percent
June, after rising food prices saw the index rise 0.4 percent in
May, its biggest increase in more than a year.
The Australian dollar bounced slightly after Reserve Bank of
Australia Governor Glenn Stevens largely refrained from pushing
a dovish line on policy that some in the market had braced for.
Australia's top central banker on Tuesday said record low
rates were working as intended and he was content with the
current state of policy, though further action would be
considered if it could "reasonably" be expected to do more.
The Aussie was up 0.1 percent at $0.9386 after
briefly rising to $0.9395.
(Editing by Shri Navaratnam)