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* Aussie dollar slips on weak domestic capital spending data
* Ukraine nerves support dollar
* Euro slips to two-week low on soft data signs
By Patrick Graham
LONDON, Feb 27 The Australian dollar led moves
on major currency markets on Thursday, down half a percent
against the dollar after weak data on business investment, deep
in negative territory at the end of a commodities-led boom.
The euro also dipped in early trade, hurt by the first signs
of soft regional inflation figures out of Germany and renewed
worries over tensions between Russia and Ukraine, which has
prompted investors to seek the safety of the dollar.
A big loser in the second half of last year, the Aussie has
regained a foothold in the past month on the back of a change in
tone by the Reserve Bank of Australia, previously intent on
weakening the currency to support growth.
But most strategists still say longer-term fair value for
the Aussie is around $0.84-85, compared with highs above $0.90
hit earlier this month. The currency was down 0.5 percent at
$0.8922 in early European trade, hit by a 5.2 percent
fall in capital spending in the fourth quarter, the biggest drop
in more than four years.
"There has been a bit of a turn in sentiment on the Aussie
in the past month and that is down to the RBA, so if we get down
to around 89 against the dollar we should see some support,"
said Derek Halpenny, strategist with Bank of Tokyo Mitsubishi
UFJ in London.
"We're not a million miles from the level we think we should
eventually get to, which is around $0.85 but I don't think we'll
see that now."
The highlight of the European day is likely to be German
inflation numbers which may set the tone for the European
Central Bank's policy meeting next week.
If the numbers are low, it could tip the balance of a market
split on the chances of more easing of policy by the ECB next
Consumer price inflation numbers traditionally dribble in
from German states in the European morning before the national
figure at 1300 GMT, forecast at 1.3 percent. An initial readout
of just 1.2 percent annual inflation from Saxony helped prod the
euro 0.2 percent lower at 1.3658.
"We are a little softer this morning. I would say the market
is positioned a little less than 50-50 on the chances of action
by the ECB," said Halpenny.
"If you'd asked me a couple of weeks ago, I'd have said
there was more certainty (that they would ease) so that is
probably edging lower but I think a lot of people may be waiting
for the inflation numbers to make their minds up."
The U.S. dollar held near a two-week high against a basket
of major currencies, as heightening tensions in Ukraine helped
support safe-haven demand for the greenback.
The dollar index was a touch higher at 80.486, close
to Wednesday's peak of 80.524, its highest since Feb. 13.
The year's major investment trend so far has been a retreat
of capital to the developed world, partially due to the first
moves towards tighter monetary policy in the United States but
supported by a series of shocks to developing markets.
That has supported traditionally safer currencies including
the dollar, yen, euro and Swiss franc. The euro fell to a
two-month low against the franc of 1.2168 francs
"The Ukraine-Russia situation is clearly not helping the
euro. There are supply issues there on gas and just generally it
is pushing people towards the dollar as a safe haven," said a
trader with one major bank in London, asking not to be named.
(Additional reporting by Ian Chua and Masayuki Kitano, editing
by Nigel Stephenson)