* New Zealand dollar slips after Fonterra cuts payout
* Dollar index holds near six-month peak, euro eight-month
* Fed, U.S. GDP & payrolls key tests for markets this week
* Euro zone inflation and China PMI also in focus
(New throughout, changes dateline from previous
By Patrick Graham
LONDON, July 29 The New Zealand dollar was the
main loser among developed world currencies on Tuesday, down
almost half a percent on a sign of weakness from the country's
influential dairy sector.
Other major currency pairs were stuck in tight ranges, with
the dollar close to six-month peaks against a basket of
currencies ahead of a raft of data and policy releases starting
with GDP and a Federal Reserve statement on Wednesday.
The yen weakened briefly past 102.0 yen per
dollar, with some traders pointing to a warning from Russia that
plans to impose sanctions would harm relations between the two
In early European deals, the kiwi was down 0.45 percent at
$0.8508, its weakest level since June 10, after dairy
giant Fonterra slashed its forecast payout to farmers in the new
season by 14 percent.
"This is all about the dairy market and a bit of carry over
from last week," said one London-based dealer. "We saw some
weakness yesterday as well but it recovered pretty quickly."
New Zealand is the only developed world economy where
interest rates have already risen, supporting solid gains for
its dollar this year. Rates are now expected to remain on hold
until the end of the year, however, as the central bank assesses
impact on growth and inflation.
Moves among major currencies were generally subdued, with
the greenback holding firm ahead of the Fed's two-day policy
meeting that starts on Tuesday, and key data this week such as
U.S. gross domestic product and the non-farm payrolls report.
The dollar index, which measures the greenback's value
against a basket of major currencies, held steady at 81.030
. It had risen to 81.084 late last week, its highest level
since early February.
The euro eased about 0.1 percent to around $1.3432,
pinned near an eight-month trough of $1.3421 set on Friday.
"You're seeing the euro capped at around $1.3450 ahead of
tomorrow's events. There is some hope that the result of this
week's outcomes in the U.S. will perpetuate the rally in the
dollar," said Stephen Gallo, a strategist with BMO in London.
In a sign of increasingly bearish market sentiment toward
the euro, data from a U.S. financial watchdog late last week
showed speculators increased their net short position in the
euro to 88,823 contracts in the week to July 22. That marked the
most bearish positioning against the single currency since late
The U.S. economy needs to do well in order for such
euro-selling sentiment to persist, said Daisuke Karakama, chief
market economist for Mizuho Bank in Tokyo.
"If bets accumulate too much in that direction though, you
do have to be wary about the possibility of a sudden reversal,"
The dollar held firm versus the yen, edging up 0.1 percent
to about 101.99 yen.
Besides the Fed policy meeting and U.S. jobs data, euro zone
inflation and PMI surveys for China and the euro zone later this
week are also on investors' radar.
The Fed is seen likely to cut its monthly bond-buying
programme by another $10 billion as it looks to wind up the
scheme later in the year, but the focus for markets is on any
clues to the timing of the first interest rate hike.
(Additional reporting by Masayuki Kitano in Singapore and Ian
Chua in Sydney; Editing by Catherine Evans)