FOREX-Dollar slides broadly, bullish data helps euro

Reuters

* Dollar back on back foot after Friday blip higher

* Euro at top of ranges after strong PMI surveys

* Yen holds firm, stays within sight of 2-week high vs dollar

* Aussie steady after brief bounce on RBA policy statement (New throughout, changes dateline from previous SINGAPORE)

By Patrick Graham

LONDON, May 6 (Reuters) - The dollar slid to an almost seven-week low against the euro on Tuesday, losing all of the positive shine from Friday's strong U.S. jobs data.

The greenback's bad performance so far this year has seen banks back off a raft of bets for dollar gains put on in January. Many traders and strategists now talk instead about there being no end in sight to the euro's strength.

As European trade got going after Britain's long holiday weekendm, the dollar fell to 79.24, its lowest against a basket of currencies since late October.

The euro, helped by strong surveys of service sector purchasing managers in Spain and Italy, rose 0.3 percent compared to levels seen in thin volumes on Monday to hit $1.3928, its highest since March 19.

Increasingly, at the heart of the dollar's weakness is a lack of conviction that the U.S. Federal Reserve, whatever the brighter economic data, will follow a reining in this year of its emergency money-printing with an actual rise in interest rates.

"The dollar got a brief boost on Friday but the fact we are back where we were tells you everything you need to know about the forces currently at play," said Neil Mellor, strategist with Bank of New York Mellon in London.

"We had a good figure but no-one wants to own the dollar. Raising interest rates in the U.S. is still a very fuzzy concept. Until we hear that definitively the Fed is planning a rate rise, the euro and others will remain attractive."

Against the yen, the dollar slipped 0.1 percent to about 102.00 yen, staying within sight of Monday's two-week low of 101.86 yen. Japanese markets themselves were closed on Tuesday for a public holiday.

On the upside, the euro remains limited by the ECB's vociferous opposition to any rise above $1.40. Yet there is little hope of action - rather than just talk - to weaken the currency at a policy meeting this week.

"Following some verbal toing and froing on the part of the ECB the market now seems to be certain that there will be no further momentum from that direction," analysts Dutch bank ING said in a morning note.

BNY Mellon's Mellor said the ECB had already pointed to June's new macroeconomic forecasts as a more likely focus for any action.

"There is the possibility of a rate cut but would that even have any impact on the euro? We've had rate cuts previously and they have had no effect," said Mellor.

Also profiting from the U.S. dollar's weakness, the Australian dollar gained 0.3 percent to $0.9283. The Reserve Bank of Australia kept interest rates unchanged and said the currency was high historically, although it refrained from calling for it to fall, as it has done in the past.

Some analysts said the RBA's view on the economy also seemed a bit more upbeat than before.

"There seems to be a slightly more positive tone to the statement itself. If you look at what they are saying about the labour market, they are saying that they have seen some improvement in indicators for the labour market," said Divya Devesh, FX strategist for Standard Chartered Bank in Singapore.

(Editing by Andrew Heavens)

View Comments (0)