Friday August 10, 2012 - 00:44:55 GMT
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Reuters - www.reuters.com
FOREX NEWS - Euro steadies on persistent hopes for ECB action
FOREX-Euro steadies on persistent hopes for ECB action
* RBA quarterly statement awaited for Aussie direction
* Rising U.S. Treasury yields could support dollar vs yen-strategist
By Lisa Twaronite
TOKYO, Aug 10 (Reuters) - The euro steadied in Asia on Friday, as hopes for progress in Europe's debt crisis gained the upper hand over worries about slowing euro zone growth.
Weak German economic data pressured the euro on Thursday, as well as the ECB's latest monthly bulletin citing downside risks to the euro zone's economic outlook.
But persistent hope that the European Central Bank will act to ease borrowing costs for Spain and Italy helped the European unit climb off its overnight lows.
The euro remained down slightly at $1.2296 but well above an overnight low of $1.2266 and a more than two-year low of $1.2042 hit last month, though it was still shy of its one-month high of $1.2444 set on Monday.
"The euro has been supported by traders reducing their long dollar positions ahead of summer holidays," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.
"There are reasons to be concerned, but a lack of fresh factors or comments from key European figures to prompt further euro selling has led traders to adjust their positions," he said.
Saito noted that euro buying flows have been observed in Asian morning trade recently, probably from funds squaring euro/dollar positions.
The euro bought 96.63 yen, above its overnight low of 96.33 yen but below Tuesday's peak of 97.82 yen. It was narrowly holding above its 14-day moving average, now at 96.23 yen.
The U.S. dollar was buying 78.59, mired in the narrow 77.90-78.80 yen range that has held since late July. It rose as high as 78.79 yen overnight, a three-week peak.
Saito also noted that the dollar may be supported against the yen by a changing view of U.S. bonds as Treasury yields have been inching up on solid U.S. data, which could help scale back expectations for another round of bond buying by the Federal Reserve.
Citigroup positioning indicators suggest that foreign exchange markets have long positions in the carry and commodity currencies that they are funding in U.S. dollars and sterling rather than euros, said Greg Anderson, senior currency strategist at Citigroup in New York, in a note to clients.
"However, no position size is anywhere close to large and for the most part positions are either shrinking or remaining flat, despite favourable price movements," he said.
The Australian dollar was slightly lower at $1.0570 after rising to $1.0615 on Thursday, its highest level since March 20.
The Reserve Bank of Australia is scheduled to issue its quarterly statement on monetary policy at 0130 GMT, in which it is expected to revise its domestic growth outlook to around 3.5 percent from 3 percent.
"The Australian dollar has been on a runaway train upward since they stopped cutting interest rates, but the wording of the RBA's Monetary Policy Statement will have a lot of influence," said Neal Gilbert, strategist at GFT, in emailed comments.
"If they hint that further easing could be in store in the future, that may put a crimp in the never-ending rise. Being that Australia is a heavy exporting country, they get uncomfortable if their currency appreciates too much, so there may be a mention of the exchange rate in the statement," he added.
The dollar index stood at 82.634, down from its overnight high of 82.789 but still well above a one-month low of 82.041 touched on Tuesday.
© Thomson Reuters 2011. All rights reserved.
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