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FOREX-Dollar near highs but rally stalls before holiday

Published 12/24/2009, 12:24 AM
Updated 12/24/2009, 12:27 AM

* Euro hovers above 3-month lows, 200-day moving average

* Dollar holds on to recent gains near 92 yen

* Holiday volumes; US weekly jobless claims at 1330 GMT

By Charlotte Cooper

TOKYO, Dec 24 (Reuters) - The dollar hovered below a three-month peak against the euro and two-month high on the yen on Thursday as its rally stalled after disappointing U.S. housing data, with more numbers to come before the holiday.

The euro was on course for its biggest monthly fall against the dollar since January and was holding just above its weakest levels since early September after dipping near $1.42 this week.

The dollar index, a gauge of its performance against six other major currencies, was also sitting below this week's three-month high as trading activity wound down ahead of the Christmas break in many major financial centres on Friday.

The focus will be on weekly U.S. jobless claims and durable goods figures later on Thursday as the market tries to gauge if a recent improvement in monthly payrolls will be sustained and what that means for the timing of U.S. rate increases.

Meantime charts show momentum for the dollar's move up against the euro and yen, which has been aided by year-end closing of short positions against the greenback, is tailing off.

"The strength of the dollar seems to be losing traction," said Tohru Sasaki, chief FX strategist Japan at JP Morgan Securities in Tokyo.

"I'm not sure if yesterday was the end of position adjustment or not but I think the adjustment of the dollar and the U.S. yield is probably near the end."

The dollar slipped 0.2 percent to 91.43 yen after touching a two-month high of 91.88 yen this week. Dealers said there was some dollar selling by Japanese exporters as the greenback neared 92 yen. Japanese markets were closed on Wednesday for a public holiday but will be open on Friday when London and New York are shut.

The dollar has rebounded from a 14-year low of 84.82 yen set at the end of November. It climbed above its 100-day moving average on Monday, after mostly trading below that level since June, and the average is now 90.92 yen.

The yen was steady against the Australian and New Zealand dollars and edged up to 131.13 yen against the euro.

The euro held steady at $1.4342 after falling as far as $1.4218 this week but was keeping above its 200-day moving average at about $1.4200, which analysts are watching to see if it will provide support to stop it falling further.

The euro has been under pressure from concerns about sovereign ratings, with Moody's Investors Service this week becoming the third rating agency this month to cut Greece's debt rating.

The U.S. Labor Department releases first-time claims for jobless benefits for the week ended Dec. 19 at 1330 GMT. Economists in a Reuters survey forecast a total of 470,000 new filings compared with 480,000 in the previous week.

Analysts are watching the data for clues as to when monthly U.S. non-farm payrolls readings could turn positive. Employers cut 11,000 jobs in November, far fewer than the market expected.

"In this context the initial claims are important," said Masafumi Yamamoto, chief FX strategist Japan at Barclays Capital in Tokyo.

The Commerce Department releases November durable goods orders at the same time. Economists in a Reuters survey expect a 0.5 percent increase versus a 0.6 percent decline in October.

The benchmark 10-year Treasury yield hit its highest in four months this week as investors have bet that recent strong data bodes well for economic recovery, although data on Wednesday showing a surprise drop in new home sales to a seven-month low reminded markets recovery would be bumpy. (Additional reporting by Masayuki Kitano; Editing by Michael Watson)

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