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FOREX-Dollar softens before more U.S. data, Aussie jumps

Published 07/28/2009, 02:06 AM
Updated 07/28/2009, 02:08 AM
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* Aussie jumps to the year's high on RBA hawkish remarks

* S&P Case-Shiller Home Price, Treasury 2-yr note sale eyed

By Satomi Noguchi

TOKYO, July 28 (Reuters) - The dollar held near an eight-week low against the euro on Tuesday with investors keen to see if more U.S. data would add to hopes for a housing industry recovery.

The Australian dollar raced to its highest level this year on surprisingly hawkish remarks from Australia's central bank chief that fuelled speculation that higher rates may be in the offing.

U.S. home sales surged in June, data on Monday showed, spurring investor risk appetite with money flowing in to equities, the euro and higher-yielding currencies like the Australian dollar.

The market is now looking to Tuesday data on May home prices for more confirmation that the U.S. housing market may be starting to recover from the worst of its slump -- a root cause of the global economic crisis.

"The general market tone for a softer dollar and yen remain unchanged amid a solid performance for stocks. Investors are opting for riskier assets," said Kazuyuki Kato, treasury department manager at Mizuho Trust & Banking.

The euro rose 0.3 percent to $1.4275 from late U.S. trade on Monday, near $1.4299 struck on trading platform EBS a day before, its highest since early June.

Talk of a euro/dollar option barrier at $1.4300 has been hindering the euro from rising above that level after approaching it three times in the past week, dealers said.

Against the yen, the euro erased earlier losses and traded up 0.2 percent at 135.75 yen, in sight of a four-week high of 136.11 yen struck on EBS on Monday.

The dollar edged down 0.1 percent to 95.10 yen as Japanese exporters sold it to repatriate their overseas earnings, but it was still close to a three-week peak of 95.39 yen hit the previous day.

The Australian dollar climbed above $0.8300, its highest level since September 2008, up 0.9 percent on the day.

It quickly shed earlier losses after Reserve Bank of Australia Governor Glenn Stevens said low rates could inflate house prices and there was no rule that dictates the RBA has to wait for unemployment to peak before raising rates.

The Aussie rose 0.8 percent to 78.99 yen, its highest level since mid-June.

Tuesday's data includes the Standard & Poor's/Case Shiller national home price report for May due at 1300 GMT and the Conference Board's July reading on consumer confidence out at 1400 GMT.

Asia stocks were steady on Tuesday, as investors took a breather after a two-week rally, though profit-taking was contained by hopes for solid corporate results in the region.

Investors were also bracing for Tuesday's $42 billion sale of two-year Treasury notes, part of this week's record $115 billion worth of debt auctions.

"Treasury auctions are under way and investors are continuing to watch what is being discussed between the U.S. and China, so it will probably be hard to build large positions," said Yuji Saito, head of the forex sales department at Societe Generale.

U.S. officials reassured their counterparts from China on Monday that the United States would return to a more sustainable fiscal situation and the two sides grappled over currency policies in high-level talks, senior Obama administration officials said. (Additional reporting by Kaori Kaneko and Charlotte Cooper; Editing by Edwina Gibbs)

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