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FOREX-Yen up as Asian shares dip, dollar near 2009 lows

Published 08/05/2009, 01:45 AM
Updated 08/05/2009, 01:48 AM
TGT
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* Cross/yen dips in tandem with Asian share declines

* Kiwi briefly touches 10-month peak vs dollar

* Some see euro rising towards December high of $1.4720

By Masayuki Kitano

TOKYO, Aug 5 (Reuters) - The yen rose broadly on Wednesday as a fall in Asian shares prompted some selling in higher-yielding currencies such as the Australian dollar.

The dollar hovered near its 2009 low against the euro and a basket of currencies, and analysts saw risks of further declines, due to increasing signs of improvement in the global economy and dollar-bearish technical charts.

The U.S. currency has slid broadly since March as riskier assets such as equities and oil rallied on improving economic data, eroding demand for the safe-haven greenback.

The dollar has extended its losses this week as data highlighted an improvement in global manufacturing activity, and U.S. equities climbed to nine-month peaks.

"One thing to watch out for is the possibility of relatively large declines in the dollar," said Tohru Sasaki, chief foreign exchange strategist for JPMorgan Chase Bank in Tokyo.

Rises in equities seem to have gained momentum and various fiscal stimulus measures will likely help lend them support for a while, pressuring the dollar, Sasaki said.

The improving global economic outlook bodes ill for the dollar, which was already vulnerable as capital inflows into the United States have been relatively subdued and since the U.S. fiscal deficit has been expanding, he added.

The euro slipped 0.1 percent from late New York on Tuesday to $1.4394. The euro had climbed to $1.4445 on trading platform EBS earlier this week, its highest since mid-December, when it rose as high as $1.4720.

The dollar dipped 0.1 percent against a basket of currencies, to 77.712, hovering nearing a 10-month low of 77.451 hit earlier this week.

The yen was broadly higher, with the dollar falling 0.3 percent to 94.93 yen and the Australian dollar falling 0.6 percent to 79.80 yen.

The yen crosses fell as regional shares dropped, with Chinese equities falling 1.7 percent. Traders also cited some dollar-selling against the yen by Japanese exporters.

The New Zealand dollar briefly scaled a peak of $0.6751 earlier on Wednesday, its highest since early October, before pulling back to $0.6714, down 0.4 percent from late U.S. trading on Tuesday.

Market players said the kiwi gained an initial boost after New Zealand's Fonterra Cooperative Group, the world's top dairy exporter, said international dairy prices surged at its latest auction, recovering after a recent run of falls.

MORE DOLLAR WEAKNESS?

The euro seems poised to rise toward its December peak of $1.4720, or perhaps even higher, said Masashi Hashimoto, senior analyst for Bank of Tokyo-Mitsubishi UFJ.

Over the past few weeks, the euro has breached key resistance on weekly Ichimoku charts by breaking above the top of the cloud. The same holds true for the Australian dollar.

"It is possible to think that this is the start of a medium-term trend," Hashimoto said.

Hashimoto added, however, that the fact that the euro's 52-week moving average was pointed downwards suggested that it was too early to come to that conclusion.

For now the euro may target the December peak, and if that is breached, the next target would be levels around $1.51, roughly where the 76.4 percent Fibonacci retracement of the euro's drop from its record high of $1.6040 last July down to its October trough near $1.2330, Hashimoto said.

Sterling dipped 0.1 percent to $1.6917, having pulled back from a nine-month high of $1.7005 hit on Tuesday. (Additional reporting by Shinji Kitamura and Satomi Noguchi; Editing by Chris Gallagher)

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