* Upward revision to PMI data lifts euro to session high
* Investors still wary of ECB, Italian political situation
* Yen strengthens after BOJ confirmation hearings
By Nia Williams
LONDON, March 5 The euro rose versus the dollar
on Tuesday, helped by slightly better-than-expected euro zone
data and some investors paring back bets of a European Central
Bank rate cut this week.
Gains were expected to be limited however, with investors
still wary of weak data that could lead to looser monetary
policy from the central bank in coming months, and the risk of
turmoil in Italy as politicians struggle to form a government.
The euro climbed 0.4 percent to a session high of
$1.30755 after a euro zone composite PMI survey came in at 47.9,
slightly better than the preliminary reading of 47.3. However,
the index remained well below the 50 mark dividing growth from
contraction in activity and dipped from the previous
Strategists said many market players felt the euro's fall on
Friday to a near three-month low of $1.2966 was overdone, and
these levels offered a good buying opportunity. Technical charts
showed resistance at the 100-day moving average at $1.3127.
"Investors are awaiting the ECB but not necessarily looking
for a very negative euro outcome. The inconclusive outcome from
the Italian elections did not produce the sell-off some were
hoping for, those who were eager to put on fresh shorts last
week are now taking those back it seems," said Valentin Marinov,
head of European G10 FX strategy at Citi.
"But even if the ECB does not surprise already dovish
expectations, we still have the risk of further deterioration in
data bringing forward bets of further cuts as soon as April."
Marinov said investor uncertainty about Italy could escalate
if there is no government in place before the end of the month,
adding he expected the euro to target $1.28.
The yen rose against the dollar and euro after confirmation
hearings of the government's nominees for two Bank of Japan
deputy governor posts, which had been widely expected by the
The Japanese government has signalled it wants the BOJ to
pursue aggressive monetary easing to stimulate the economy, a
stance that has weighed heavily on the yen since November.
The dollar fell 0.5 percent to 93.04 yen, pulling
away from a high of 94.77 yen struck on Feb. 25, which was the
dollar's highest level against the yen since May 2010.
Jesper Bargmann, Asia head of G11 spot FX for RBS in
Singapore, said the dollar's drop against the yen was mostly a
reflection of market positioning as traders were probably long
dollar/yen going into Tuesday's confirmation hearings.
"I think what's happening is a little bit of buying the
rumour, selling the fact," Bargmann said.
"So when we see the headlines come out, everyone is already
expecting more, even though there's very little more they can
actually say. The rhetoric has been quite aggressive. But now we
need to see some action," he added.
The dollar extended losses after opposition Democratic Party
lawmaker Keisuke Tsumura said he could not support Kikuo Iwata,
one of the government's nominees and an advocate of aggressive
monetary easing, because Iwata wants to revise the law governing
the central bank's independence.
Traders, however, said Iwata could still win parliamentary
approval even if the Democratic Party of Japan (DPJ) were to
oppose him, as long as other opposition parties joined the
ruling Liberal Democratic Party (LDP) to approve his nomination.
The euro dipped 0.2 percent to 121.53 yen.
The Australian dollar rose 0.4 percent to $1.0237,
getting a lift after the Reserve Bank of Australia (RBA) kept
interest rates unchanged at a record low of 3.0 percent, as