* Euro falls to two-month low against yen
* Emerging markets under pressure, rate hikes no help
* Fed cuts bond purchases to $65 bln a month as expected
By Anirban Nag
LONDON, Jan 30 The dollar rose against a basket
of currencies as well as the safe-haven yen on Thursday as
investors positioned for robust growth data from the world's
largest economy which would increase the greenback's allure.
The advance reading of fourth-quarter U.S. gross domestic
product data is due at 1330 GMT and forecasts are for a 3.2
A good number will keep alive expectations that the Federal
Reserve will continue reducing its monetary stimulus in the
coming months, pushing up U.S. bond yields and making the dollar
The dollar was up 0.5 percent against a basket of
currencies at 80.880, with the euro and the British pound being
the leading losers. The euro was down 0.5 percent at
$1.3603, while sterling shed 0.45 percent to trade at
The dollar was up 0.2 percent against the yen at 102.50
with more gains likely in store if growth data beats
"A good GDP number could see U.S. yields push higher and
then questions will be asked why should investors stay in
structurally weak emerging market countries and not prefer the
safety and better fundamentals of the U.S.," said Jeremy
Stretch, head of currency strategy at CIBC World Markets.
"That should be supportive of the dollar."
Earlier, higher-yielding currencies like the Australian and
New Zealand dollars came under pressure as a sell-off in
emerging market assets weighed on investor sentiment.
The mood darkened further after a private measure of Chinese
manufacturing slipped to a six-month low for January and gave
speculators a fresh excuse to target riskier assets like stocks
and rush to the safety of U.S. Treasuries and German bunds.
The demand for Treasuries saw the U.S. 10-year yield
fall to its lowest in more than two months on
Wednesday. It stabilised around those levels, taking in its
stride the Federal Reserve's decision to cut its monthly bond
purchases by another $10 billion.
The gradual reduction in liquidity from the Fed, however,
spooked higher-yielding and riskier currencies like the Turkish
lira and the South African rand, all of which
underpinned the dollar and the yen.
"This fragility suggests ample room remains for emerging
market position-squaring from medium and longer term accounts.
This could provide significant benefit to safe-haven currencies
like the dollar and the yen in the week ahead," said Adam Myers,
European head of FX strategy at Credit Agricole.
The euro lost ground, falling to a two-month low against the
yen of 138.90 yen as investors geared up for soft
German inflation data to be released later in the day.
That will stoke talk on whether the European Central Bank
should ease policy further to ward off disinflationary pressures
in the economy.
The wider euro zone inflation data is due on Friday.
Apart from souring sentiment towards riskier currencies,
investors were also quick to punish the New Zealand dollar after
the Reserve Bank of New Zealand kept interest rates steady,
dashing some expectations that it might raise them.
The kiwi dollar touched a one-month low of $0.8145 in the
European session, extending losses seen in Asia.