FOREX-Euro falls on bank sector jitters, RBA eyed

Published 09/06/2010, 09:49 PM
Updated 09/06/2010, 09:52 PM

* Euro falls from 3-week high as bank worries rekindled

* USD near 15-yr low vs yen, BOJ expected to stand pat

* RBA seen leaving rates at 4.5 pct, statement in focus

By Rika Otsuka

TOKYO, Sept 7 (Reuters) - The euro slid on Tuesday from a three-week peak against the dollar hit the previous day, as rekindled worries about the European banking sector prompted investors to cut risks.

The euro fell 0.5 percent on the day to $1.2810 after triggering stop-loss orders in the $1.2850-60 area, as a Wall Street Journal report stoked fears about the viability of European banks by highlighting the weakness of euro zone stress tests earlier in the year.

On Monday, the single European currency rose as high as $1.2920, its highest in almost three weeks.

The euro is now testing support at $1.2795-80, with the 21-day moving average at $1.2795 on Tuesday and the 55-day moving average at $1.2788.

"Concerns about euro zone banks have been growing again, hitting investor sentiment that had improved a little after better-than-expected U.S. jobs data last week," said Tsutomu Soma, senior manager of the foreign securities department at Okasan Securities.

"The trend in the euro might have changed as the market's mood as shifting back toward risk reduction."

The dollar index, a gauge of the U.S. currency's performance against a basket of six major currencies, rose 0.4 percent to 82.355, rebounding from a four-week trough of 81.876 on Monday.

The dollar was steady against the yen at 84.20 yen, remaining within sight of a 15-year low of 83.58 yen hit last month, as investors are keen to buy safe-haven currencies, such as the Japanese currency and the Swiss franc.

U.S. financial markets were closed on Monday for the Labor Day holiday and will resume trading later in the day.

The Bank of Japan concludes its two-day policy meeting later in the day and is expected to hold off on easing monetary policy this time.

The BOJ boosted its cheap loan scheme at an emergency meeting last week, bowing to government pressure for steps to protect a fragile recovery after the yen surged to a 15-year high against the dollar.

The dollar could slip further, given expectations that the central bank will take no additional easing steps in the near term, while wariness over possible market intervention by Japanese authorities to rein in the yen's gains is keeping speculators cautious about aggressively taking long yen positions, traders said.

The Australian dollar dipped 0.2 percent on the day to $0.9150, having slipped from a four-week high of $0.9181 hit on Monday.

The Reserve Bank of Australia is widely expected to keep rates at 4.5 percent at its board meeting on Tuesday. Investors will be looking for the central bank's view on the economy after recent strong domestic data. A policy decision is expected at 0430 GMT. (Editing by Edmund Klamann)

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