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FOREX-Dollar mostly holds ground after jump from '09 lows

Published 06/03/2009, 09:07 PM
Updated 06/03/2009, 09:16 PM
TGT
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* Dollar holds gains made Wed after data, cbanker comments

* Outcomes of ECB, BOE meetings in focus

By Aiko Hayashi

TOKYO, June 4 (Reuters) - The dollar mostly held its ground on Thursday after a big reversal from 2009 lows on comments from Asian monetary officials and weaker-than-expected U.S. data that took the wind out of a risk rally in other major currencies.

Investors had a reality check on Wednesday when data showed the vast U.S. service sector contracted for the eighth straight month in May and employers axed 532,000 private-sector jobs, undermining optimism about an economic turnaround.

Comments from several Asian monetary officials that Asian central banks would keep buying Treasuries even if the U.S.' credit rating were to be cut also boosted the dollar, analysts said.

Added to that, a slide on Wall Street helped take the euro, sterling and the Australian dollar down from 2009 peaks on Wednesday and sent the U.S. dollar up more than 1 percent against a basket of six currencies.

"The U.S. data reminded market participants once again that the economic outlook isn't so rosy as many have been saying lately," said Hideki Amikura, deputy general manager of forex trading at Nomura Trust and Banking.

He said the much talked-about 'green shoots' scenario may peter out after restocking in the April-June quarter, which is usually more buoyant than the first quarter as firms tend to boost inventories.

"This year's rebound just happened to be more dramatic than usual because January-March was so bad," he said.

The euro edged up 0.2 percent to $1.4180 on electronic trading platform EBS, well off its 2009 high of $1.4339 after falling 1 percent on Wednesday.

The dollar gained 0.2 percent to 96.15 yen, while the euro rose 0.4 percent to 136.39 yen.

One analyst said there had been some importer demand out of Tokyo for cross/yen which also buoyed the Australian dollar and the New Zealand dollar against the Japanese currency.

Both tumbled on Wednesday, with the Aussie shedding more than 2 percent against the dollar and the kiwi dropping more than 3 percent. On Thursday, the Aussie rose 0.4 percent from late U.S. trade to $0.8030 and the kiwi also gained 0.4 percent, to $0.6360.

Traders said the focus was now on the outcome of central bank meetings in Europe later in the day and U.S. jobs data due on Friday.

The European Central Bank is expected to hold interest rates at 1 percent when it announces its decision at 1145 GMT.

The market is waiting to see details of its covered bond purchase plan to keep long-term rates down and see what its staff projects for economic growth and inflation this year and next.

The Bank of England is expected to keep its benchmark rate at 0.5 percent at its announcement at 1100 GMT. It is also likely to stick to its current 125 billion pound ($208 billion) target for quantitative easing.

Sterling held at $1.6328 after hitting a seven-month peak of $1.6664 on Wednesday.

Federal Reserve Chairman Ben Bernanke told the House of Representatives Budget Committee rising U.S. debt was contributing to a spike in longer-term interest rates and now was the time to start working on reining in deficits.

But he gave no clue as to whether the U.S. central bank would step up its purchases of government debt or mortgage-backed securities to offset the rising borrowing rates, something investors have been watching for. (Editing by Chris Gallagher)

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