* Sterling, Aussie and kiwi retreat from recent highs
* BOE's Carney less hawkish than expected
* Dollar drifts lower vs yen, awaits US GDP revision
(Recasts, adds details)
By Anirban Nag
LONDON, June 25 Sterling extended losses on
Wednesday, falling sharply against the euro as investors cut
favourable bets on the currency after Bank of England governor
cooled expectations of an interest rate hike later this year.
The euro was the main beneficiary of the pound's losses, and
stayed firm against the dollar. The single currency also made
gains against growth-linked and less-liquid currencies like the
Australian and New Zealand dollars amid geopolitical concerns in
the Middle East which have knocked down shares.
Surprisingly less hawkish comments from BoE Governor Mark
Carney on Tuesday drove currency markets, sending the pound to a
one-week low of $1.6953 and pulling further away from a
5-1/2 year peak of $1.7064 set last Wednesday. The euro was up
0.2 percent at 80.30, rising past stop-loss buy
orders at 80.25 pence.
Carney said Britain's economy still has plenty of slack to
work through and that financial markets underestimated how much
uncertainty there was in the economy.
Analysts said the impression he left was a slightly dovish
one and contrasted with his hawkish speech earlier this month.
The resulting uncertainty was driving speculators to trim huge
bets placed in sterling's favour.
"The net result in the very near term may be that from a
very overbought position technically, the pound will see a
correction, towards $1.6920 against the dollar and 81.10 for
euro/sterling," said Kit Juckes, currency analyst at Societe
DOLLAR AWAITS GDP REVISION
The dollar drifted lower against the yen with some investors
cautious ahead of the final reading of first-quarter U.S. GDP
data. It is forecast to be revised down and could boost
expectations that the Federal Reserve is in no hurry to tighten
Influential Federal Reserve policymaker, William Dudley,
said on Tuesday the U.S. central bank could reasonably wait
until mid-2015 to raise interest rates without risking an
undesirable rise in inflation.
The dollar was down 0.1 percent versus the yen at 101.85
while the euro was up at $1.3615. The dollar index
was slightly lower at 80.295, despite a rise in U.S.
two-year Treasury yields which often supports the
"Power is building up and dollar/yen is likely to move
significantly in either direction if a break does occur," said
Bart Wakabayashi, head of forex at State Street in Tokyo.
"Talk is that stop orders are building up steadily at 101.50
yen and 102.50 yen. Market players are currently trading within
this narrow band to make a little change. Overall, the yen looks
better bid unless the Bank of Japan comes up with its next
Japanese CPI will be released on Friday and any fresh signs
of the country escaping deflation are likely to further curb
prospects for additional BOJ easing.
(Additional reporting by Shinichi Saoshiro in Tokyo; Editing by