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FOREX-Yen, dollar rebound as stocks, oil prices fall

Published 08/04/2009, 09:25 AM
Updated 08/04/2009, 09:27 AM
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* Yen, dollar gain as equities, oil prices turn lower

* Drop in equities, oil encourage profit-taking

* Aussie edges lower from 10-month highs after RBA

* Caution ahead of ECB, BoE decisions, US jobs data (Recasts throughout, adds comments; changes dateline, previous LONDON, byline)

By Vivianne Rodrigues

NEW YORK, Aug 4 (Reuters) - The yen and the dollar gained on Tuesday as a decline in global equities and oil prices encouraged investors to take profits on higher risk and commodity-based currencies after recent sharp gains.

European shares fell after hitting a 9-month high on Monday, while stocks futures in the U.S. also pointed to a lower start on Wall Street after the S&P 500 index topped the 1,000 mark on Monday.

Analysts said this helped the yen and the dollar recoup some of their recent heavy losses, which accompanied a jump in risk appetite as investors became increasingly confident of an improvement in the global economy.

"Today's price action in the forex market is somewhat counter to yesterday's very notable developments, as we see most currencies marginally softer against the dollar and the yen as equities give back some gains and commodities soften," said Camilla Sutton, a currency strategist at Scotia Capital, in Toronto.

Better-than-expected second-quarter company results, brighter manufacturing reports from the U.S., Europe and China, and stimulative policy measures have boosted hopes the global economy may have bottomed out from its worst recession in decades.

But analysts noted some caution ahead of key events this week, including policy decisions by the European Central Bank and the Bank of England on Thursday and U.S. non-farm payrolls data on Friday.

"Today's U.S. equity futures and commodity weakness remind us that it isn't a one way march towards recovery in the near term," said Sutton.

In morning trading in New York, the euro was down 0.2 percent against the dollar at $1.4385, though still not far from a nine-month high of $1.4445 hit on Monday, according to Reuters data.

A report in the U.S. showing consumer spending rose slightly more than expected in June had limited impact on forex trading as investors focus on private and government readings for July payrolls later in the week.

"(Tomorrow's) ADP job report will have more impact on the market than personal income and spending certainly because it gives us better idea what to expect from nonfarm payrolls," said Michael Woolfolk, a senior currency strategist, at the Bank of New York Mellon, in New York.

CRUDE PRICES DROP

Traders said some currency options with a strike price of $1.4450 were set to expire later in the day, which may be capping moves.

Technical analysts see the euro rising to $1.4720, hit in mid-December last year, and possibly pushing higher.

The yen was the main outperformer, however, with the dollar down 0.6 percent at 94.71 yen and the euro down 0.8 percent at 136.33 yen.

Falls in the prices of oil and metals such as copper on Tuesday weighed on commodity-based currencies like the Australian, New Zealand and Canadian dollars, which had all hit multi-month highs in early trade, buoyed by the rally in risky assets.

The Australian dollar relinquished gains made after the Reserve Bank of Australia left interest rates unchanged as expected but dropped its easing bias, backing expectations for a rate hike by the end of the year.

The Australian dollar was last little changed at $0.8395 after rising to $0.8471 according to Reuters data, the highest since late September.

(Additional reporting by Wanfeng Zhou in New York and Jessica Mortimer in London) (Editing by Theodore d'Afflisio)

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