* Euro pushes to fresh 2014 low against dollar as support
* Australian dollar rises on surprisingly high core
By Lisa Twaronite and Ian Chua
TOKYO/SYDNEY, July 23 The dollar held close to a
six-week peak against a basket of currencies in Asian trade on
Wednesday, as the euro edged down to touch a fresh 2014 low on
the diverging interest rate outlook for the U.S. and euro zone.
The dollar index, which tracks the greenback against
a basket of six major rivals, was steady on the day at 80.773,
not far from a Tuesday high of 80.837 touched on expectations
that higher U.S. interest rates are on the horizon.
Data issued on Tuesday showed U.S. inflation was 0.3 percent
in June, in line with most analysts' forecasts, though core
inflation, excluding volatile food and energy prices, was just
0.1 percent, about half of what analysts had forecast.
Despite the weaker-than-expected core inflation reading,
market expectations that the U.S. Federal Reserve is on track to
continue tapering its bond purchase programme and then raise
interest rates in the latter half of 2015 remained intact.
"The U.S. will raise next year, while in Europe, by
contrast, we might see more easing steps," Ayako Sera, senior
market economist at Sumitomo Mitsui Trust Bank in Tokyo.
The euro languished at multi-month lows against many of its
peers, having moved decisively lower in the previous session
with an eye-catching fall in the Swiss franc. The weaker euro
dovetailed with expectations for the European Central Bank to
ease policy further.
The common currency was treading water at $1.3465
after touching a fresh eight-month low against of $1.3458
earlier, while it also slipped about 0.4 percent against the
Australian dollar to A$1.4271.
Some traders noted a big buy order in dollar/Swiss franc
from a real money fund had helped push the greenback up on the
euro, cracking a big barrier in the $1.3475-$1.3510 zone.
The dollar was steady in Asia at 0.9022 francs, and
crept slightly lower against its Japanese counterpart to 101.41
Against the yen, the euro slid to its lowest in over five
months to 136.46 yen and was last at 136.58 yen,
bringing February's 2014 trough of 136.25 yen back in view.
Analysts at BNP Paribas noted the previously strong support
for the euro from capital inflows has now been unwound, with
purchases of foreign securities by European investors
outweighing overseas demand for euro zone assets.
"The gradual widening in interest rate differentials in
favour of the U.S. also adds to the argument that EURUSD has
scope to fall further as we target 1.32 on our trade
recommendation," they wrote in a note to clients.
The premium offered by two-year U.S. Treasuries over German
debt has widened to around 46 basis points, levels not seen
Investors' risk appetite began to return, with Asian shares
rising to fresh three-year highs and U.S. and European stocks
closing higher on Tuesday even as investors continued to warily
monitor simmering geopolitical tensions.
The European Union threatened Russia on Tuesday with harsher
sanctions over Ukraine, while fighting around Gaza continued.
The high-flying pound edged up about 0.1 percent to $1.7073
, aiming back towards a six-year top of $1.7192 set last
The Australian dollar added about 0.4 percent to buy $0.9432
, after spiking to a nearly two-week high of $0.9439 on
surprisingly high core inflation figures.
Australian consumer prices rose only modestly last quarter
but a higher-than-expected reading for a key gauge of underlying
inflation was enough to dent market speculation of future rate
(Editing by Eric Meijer)