SINGAPORE, July 7 (MNI) - The U.S. dollar held a mixed tone through the Asian afternoon Thursday, firmer against the yen but lower on the aussie and euro, as risk appetite improved after better-than-expected Australian jobs data and ahead of tonight's European Central Bank meeting. The Asian market started with some worries about risk appetite after China raised interest rates again late Wednesday. The 25 basis point increase in the one-year deposit and lending rates, the fifth since last October, takes effect today. The decision resulted in mixed views, with some speculating that the government has finished raising interest rates for this cycle. But several Chinese government economists said in comments published today that China's need to stabilize inflation and tackle negative real interest rates mean there is be more interest rate increases. "The timing of the announcement this time resembles that of the April announcement, coming right in front of the usual monthly data deluge (starting next week)," noted analysts at United Overseas Bank. "Despite this latest move, we believe that PBOC is still on track for at least another round of 25bp increase on its interest rates, possibly towards early Q4. In all, we are still expecting 1-year lending rate at 6.81% and 1-year deposit rate at 3.75%, by end-2011." The release of Australia's labor force survey for June provided the market with a welcome distraction, with the data coming in above forecasts and resulting in minor gains in most risk instruments, led by aussie-dollar. The pair opened near $1.0700 this morning and then jumped to $1.0750 after the data were released. It extended the high to $1.0761 in the late morning here, compared with the session low of $1.0686. The Australian Bureau of Statistics said employment in June rose 23,400, above the median market forecast of a 17,500 rise, while the unemployment rate stayed at 4.9%, the same as in the previous month. The overall employment result was good and looking through the volatility, there can be seen a steady pick-up in job creation after a disaster induced lull, ICAP senior economist Adam Carr said. "This isn't an insignificant event," Carr added. While the rebound in the jobs market is positive, analysts don't believe this, by itself, will provide the Reserve Bank of Australia with enough ammunition to hike its official cash rate target anytime soon. This may limit further gains in the aussie, with $1.0800 seen as a strong barrier. "Risk was bid in Asia yesterday and it was then slammed when Europe came in," commented Westpac economists. "So perhaps traders will hold back until later today before taking the aussie up. It seems hard to see it back below $1.0720 on the day, and the stops on the topside beckon." Aussie's rise today gave the euro some room to pick up some of the ground lost overnight following Moody's decision to downgrade Portuguese bonds to junk status. By the end of the Asian session, aussie-dollar was still holding up around $1.0732, while euro-dollar was at $1.4319, compared with $1.4300 near the U.S. close overnight. "Risk sentiment finally stabilized during the U.S. session once the market had fully digested yesterday's news of Portugal's ratings downgrade," commented UBS analysts. Euro-dollar opened around $1.4320 this morning after a $1.4286 to $1.4339 U.S. session range. The pair inched up through last night's high to reach $1.4348, coaxed along by the Australian dollar's firm tone, but failed to break higher amid caution ahead of tonight's European Central Bank meeting. The ECB is widely expected to raise its key minimum refi rate by 25 basis points to 1.50%. ECB President Jean-Claude Trichet's recent use of the "strong vigilance" phrase further cemented market expectations of a 25 basis point hike. "Since then, fresh austerity measures have been passed in Greek legislature while Eurozone finance ministers have sanctioned the next tranche of aid to Greece," said DBS Bank analysts. "This means a rate hike today is all but a done deal." More important than the hike itself will be Trichet's press conference and whether he will suggest scope for another rate hike in the fall. If the ECB doesn't disappoint, most analysts believe the downside for the euro will be limited in the near-term. The pair topped out at $1.4577 Monday, then broke below its 55-day moving average, at $1.4406 currently, with an eye now on the 100-day moving average below, at $1.4266. In other pairs, dollar-yen traded with a fairly subdued tone through the session today. It stood at Y80.97 in late dealings, after a Y80.80 to Y81.02 range, and up slightly from Y80.82 overnight in the U.S. According to dealers, dollar-yen bids remain in place from just below the intraday low and stretching down to Y80.50, providing support. Sell orders at Y80.00/15, ahead of a run of stops starting from Y81.30, are keeping gains limited for now. Market News International's tech analysts noted the pair continues to hold below the Ichimoku cloud and Bollinger band at Y81.25/30 but is bobbing above a 3-week support line at Y80.38. Daily studies are also in neutral territory, and suggest higher risk of further range-trading.

Source