FOREX-Dollar falls broadly before G7; ECB in focus

Published 10/07/2010, 04:31 AM
Updated 10/07/2010, 04:36 AM

* Dollar below Sept intervention levels vs yen, a 15-yr low

* Euro nears $1.40, focus on ECB's Trichet at 1230 GMT

* Aussie dollar surges to 27-year high, close to parity

(Changes dateline, adds quote, detail, previous TOKYO)

By Neal Armstrong

LONDON, Oct 7 (Reuters) - The dollar fell broadly on Thursday, sliding to a 15-year low versus the Japanese yen and an all-time low against the Swiss franc on the prospect of more money-printing by the U.S. Federal Reserve.

The Australian dollar surged to a 27-year high against its U.S. counterpart after surprising strength in the job market revived talk of a rate hike by the Reserve Bank of Australia, while the euro rose to an eight-month high before a European Central Bank policy meeting.

The dollar's latest decline made traders nervous, as the U.S. currency traded below levels where Tokyo started its first intervention in six years on Sept. 15.

Still, some market players speculate Japan may refrain from intervention before a Group of Seven (G7) policymakers meeting this weekend where the threat of a "currency war" is likely to dominate discussion.

"Currency imbalances will be a topic of discussion at the G7 but I don't think the yen will be a major issue. There will be more focus on China and the level of the yuan," said Manuel Oliveri, currency strategist at UBS in Zurich.

U.S. Treasury Secretary Timothy Geithner said on Wednesday that global institutions must persuade emerging countries such as China to let their currencies rise or risk competitive depreciations that would endanger the world economy.

Naoyuki Shinohara, deputy managing director of the International Monetary Fund and former Japanese vice finance minister for international affairs, told Reuters he saw little point in Japan trying to guide the yen.

At 0815 GMT the dollar was at 82.40 yen after hitting a 15-year low at 82.24 on EBS.

"Geithner's comments show that the U.S. wants a weaker dollar," said Minoru Shioiri, chief manager of forex trading at Mitsubishi UFJ Morgan Stanley Securities.

The dollar fell to a fresh eight-and-a-half month low of 77.063 versus a basket of currencies and an all-time low versus the Swiss franc of $0.9555 on trading platform EBS.

AUSSIE SHINES

The Australian dollar surged to a 27-year high of $0.9915 after triggering stops above its 2008 high of $0.9851 and option barriers at $0.9900.

Australian total employment jumped nearly 50,000 in September, more than double estimates, in a stark contrast to unexpectedly soft U.S. private sector jobs data on Wednesday that sparked a fresh wave of dollar selling.

"As Australia is not in an easing cycle and doesn't have fiscal problems like the others, the Australian dollar is likely to remain favoured," said Koichi Yoshikawa, head of FX trading at BNP Paribas.

Traders said the Aussie was likely to test parity with the dollar and then $1.0236, the 161.8 percent Fibonacci projection derived from this year's range.

The euro rose to an 8-month high of $1.3995 on EBS after eroding resistance around $1.3956, a 50 percent retracement of its descent from a record peak around $1.6040 in 2008 to a four-year low of $1.1876 hit in June. Heavy offers were seen into $1.4000.

The euro could be set for a volatile session as traders wait to see whether European Central Bank President Jean-Claude Trichet makes any reference to currencies at a news conference around 1230 GMT after a policy meeting. Interest rates are expected to stay at 1.0 percent.

The euro's rise is seen endangering the euro zone economic recovery, but analysts thought Trichet was more likely to comment on the dollar.

"The euro is rising because the ECB is not focusing on QE. There's a chance Trichet may comment on the dollar as he has done before, but there's still huge optimism for a higher euro across our client base." said Oliveri at UBS.

(Additional reporting by Hideyuki Sano)

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