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REFILE-FOREX-Dollar mired near lows, Aussie near 27-year peak

Published 10/07/2010, 02:24 AM
Updated 10/07/2010, 02:28 AM
EUR/JPY
-

(Corrects US closing rates in table at end of story)

* Caution on Japan intervention heightened after dollar falls

* Some think Japan may not intervene before weekend G7 meet

* Aussie on track for 27-yr high vs dollar on solid jobs data

* Focus on Trichet's comments at ECB policy meeting

By Hideyuki Sano

TOKYO, Oct 7 (Reuters) - The dollar was mired near a 15-year low versus the Japanese yen and an eight-month low against the euro on Thursday on the spectre of more money-printing by the U.S. Federal Reserve as early as next month.

The dollar is on the verge of sliding to a 27-year low against the Australian dollar, which shot up after surprising strength in the job markets revived talk of a rate hike by the Reserve Bank of Australia.

The dollar's latest decline has made many traders nervous about Japanese intervention, as the U.S. currency was flirting with the levels where Tokyo started its first intervention in six years on Sept. 15.

Still, some market players speculate Japan may refrain from intervention ahead of a Group of Seven (G7) policymakers meeting this weekend where the threat of "currency war" is likely to dominate discussion.

Fuelling that view were comments from U.S. Treasury Secretary Timothy Geithner on Wednesday that global institutions must persuade emerging nations such as China to let their currencies rise or risk a round of competitive depreciations that would endanger the world economy. [ID:nN06208024].

Naoyuki Shinohara, deputy managing director of the International Monetary Fund and former Japanese vice finance minister for international affairs, also told Reuters he saw little point in Japan trying to guide the yen. [ID:nTOE69600Z]

The dollar stood at 82.86 yen , edging up from a 15-year low of 82.75 hit on Wednesday as traders suspect Japanese intervention would most likely take place during Asian trade.

Prime Minister Naoto Kan reiterated on Thursday that the government would take decisive steps if needed. [ID:nTKF107034]

While wariness about intervention is likely to keep the dollar above Wednesday's low of 82.75 in Asia, traders said the market might aim later for stop-loss orders around 82.50 yen.

"Geithner's comments show that the U.S. wants a weaker dollar. In the near term, the dollar could fall as low as 82 yen," said Minoru Shioiri, chief manager of forex trading at Mitsubishi UFJ Morgan Stanley Securities.

On the charts, it has a support line connecting lows in Nov 2008 and Dec 2009 which comes in at 82.70 yen and an initial target at 82.10. Resistance is seen at 83.30-50 yen.

AUSSIE SHINES

The Australian dollar surged to a two-year high of $0.9845 and looks set to test resistance at $0.9851. A climb above that would take it to its highest since 1983.

Australian total employment jumped nearly 50,000 in September, more than double estimates, in a stark contrast to unexpectedly soft U.S. private sector jobs data on Wednesday that sparked a fresh wave of dollar selling.

"As Australia is not in an easing cycle and doesn't have fiscal problems like the others, the Australian dollar is likely to remain favoured," said Koichi Yoshikawa, head of FX trading at BNP Paribas.

Beyond $0.9851, it is likely to test parity with the dollar and then $1.0236, the 161.8 percent Fibonacci projection derived from this year's range. [ID:nSGE68N04X]

The euro was steady at $1.3925, within a whisker of an eight-month high of $1.3949 hit on Wednesday.

The euro faces major resistance around $1.3956, a 50 percent retracement of its descent from a record peak around $1.6040 in 2008 to a four-year low of $1.1876 hit in June.

Given the market's fixation with U.S. quantitative easing expectations, however, the euro has more room to gain, especially if European Central Bank President Jean-Claude Trichet makes it clear later in the day that he is not going to join the Fed and the Bank of Japan in pursuit of more monetary easing.

Trichet holds a news conference after a policy meeting, with interest rates expected to stay at 1.0 percent. [ID:nLDE6950HJ]

"If Trichet shows a negative stance towards easing, the clear difference in their policy stance would likely lead to further gains in the euro," said Tohru Sasaki, head of Japan rates and forex research at JP Morgan Chase Bank.

The euro is also likely to gain against the yen, after the Bank of Japan's easing steps earlier this week including a programme to purchase various assets, Sasaki said.

The euro fetched 115.38 yen , after hitting a five-month high of 115.64 yen on Wednesday.

Sterling steadied at $1.5880 ahead of the the Bank of England's Monetary Policy Committee meeting later in the day.

Analysts expect at least one board member will vote for the central bank to expand its asset purchase programme, and investors suspect it may eventually adopt quantitative easing, even though it is expected to stand pat this time. [ID:nLDE6951BM] (Additional reporting by Reuters FX analysts Krishna Kumar in Sydney and Rick Lloyd in Singapore; Editing by Joseph Radford)

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