FOX: Euro rises on debt auctions; dollar down before Fed
By Vivianne Rodrigues
NEW YORK, (Reuters) - The euro rose against thedollar Tuesday, helped by solid demand at sales ofperipheral euro zone debt, while expectations that the U.S.Federal Reserve may consider additional monetary easing weighedon the greenback.
Irish, Greek and Spanish government debt auctions attracteddecent demand, easing concerns about whether the euro zone'shighly indebted countries can obtain the funding they need. Fordetails, see
Spreads between yields on peripheral euro zone and Germanbonds narrowed, while European equities rose
Few expect the Fed, which is holding a regular policymeeting on Tuesday, to apply another dose of quantitativeeasing (QE) when it announces its decision around at 2:15 p.m.. The accompanying statement, however, is expected tobe dovish due to recent evidence of a weakening economy.
"The consensus is that the Fed won't announce any QE today,but no one wants to be long dollars going into the meeting,"said Niels Christensen, currency strategist at Nordea inCopenhagen.
"The statement might be quite dovish, which could intensifyspeculation of more QE later in the year. This would leave thedollar vulnerable."
In morning trading in New York, the euro was up 0.5 percentat $1.3120 . On Friday the single currency hit itshighest since August 11 at $1.3159, according to Reuters data.
As long as the euro holds above the $1.3030 area, sometechnical analysts see its Aug. 6 high of $1.3334 as an upsidetarget. But it has to first breach its 200-day moving average,which comes in at about $1.3220.
The dollar index was down 0.38 percent at 81.022 .
In the United States, the dollar briefly pared lossesagainst the yen after a report showed housing starts increasedmore than expected in August.
Despite the improvement in the data, analysts said it isstill too early to declare it a meaningful improvement in thehousing sector.
"Housing starts are at very low levels but we're clearlyseeing a solid bottom in the housing market," said MatthewStrauss, a senior currency strategist at RBC Capital, inToronto. "It's too early though to call it a housing marketrecovery."
INTERVENTION FEARS
Fear of more intervention by Japanese authorities to curbyen gains limited the greenback's losses. The dollar was last0.4 percent lower at 85.35 yen , with traders reportingstop loss orders around 85.20 yen.
The dollar has failed to climb above its post-interventionhigh of 85.94 yen set last Friday on the EBS trading platform,capped by Japanese exporter selling ahead of their half-yearbook-closing on Sept. 30.
Its 55-day moving average, now at 85.87 yen, has become aresistance level since Japan intervened last Wednesday, andfurther resistance lies at 86.26, the bottom of its dailyIchimoku cloud trend indicator.
Some analysts do not rule out another push by Japaneseauthorities to push the greenback above 86 yen. Many doubt theywould let the dollar fall below 85.00.
Still, downside risks for dollar/yen remained, should theFed lay the ground for further quantitative easing.
"It will be a close call, since some of the recent datashow the U.S. economy is stabilizing," said Lee Hardman,currency economist at BTM-UFJ.
"But if the Fed signals more QE, U.S. yields could fall andtake the dollar lower against the yen."
The dollar/yen pair has a very strong correlation to thespread between U.S. and Japanese government bond yields.
Meanwhile, the Australian dollar stayed near a two-yearpeak of $0.9495 hit on Monday after the country's central bankchief suggested Australian interest rates would rise further..(Additional reporting by Gertrude Chavez-Dreyfuss in New Yorkand Jessica Mortimer in London; Editing by Chizu Nomiyama)
