FOREX-Dollar up vs euro, little changed vs yen on Dow, data
* U.S. stock record and economic data help dollar
* Investors still wary of ECB, Italian political situation
* Yen strengthens after BOJ confirmation hearings
NEW YORK, March 5 (Reuters) - The U.S. dollar gained against the euro and pared losses against the yen on a record high in the Dow Jones Industrial Average of blue-chip stocks and strong U.S. economic data. Shortly after the opening bell, the Dow rose above the intraday all-time high reached in October 2007, when the world was heading toward the financial crisis. (.N). Thirty minutes into the New York stock trading session, a report showed the pace of growth in the vast U.S. services sector accelerated to its fastest pace in a year in February, helped by a pick-up in new orders and demand for exports, an industry report showed on Tuesday. (ID:nL1N0BWC1Y) Both events boosted the dollar. "The market is seeing positive U.S. data as positive for the dollar," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York. "Economic data is providing underlying support." The euro was last down 0.1 percent at $1.3016, well off the session peak of $1.3075, while the dollar was little changed against the yen at 93.43 yen, well off the session low of 92.89 yen. The dollar's fortunes on Tuesday during the New York trading session were a sharp reversal of trading earlier in the global day. The single currency climbed to a session high on Tuesday of $1.3075 after a euro zone composite PMI survey came in at 47.9, marginally better than the preliminary reading of 47.3. Euro zone retail sales data also beat expectations and provided a slight boost to the single currency.
The euro zone PMI remained well below the 50 mark dividing growth from contraction, however, and dipped from the previous month. Early gains were capped as investors weighed the chances the ECB will cut interest rates this week. And as the currency bloc's economy continues to falter despite Tuesday's data, risk rises that the ECB will ease policy in coming months if not this week. "Even if the ECB does not surprise already dovish expectations, we still have the risk of further deterioration in data bringing forward bets of further cuts as soon as April." said Valentin Marinov, head of European G10 FX strategy at Citi in London. The euro has also been hurt by political concerns in Italy. Last week's election left no group with a working majority in parliament and that meant Italy could be inching closer towards another election within months. Marinov said investor uncertainty about Italy could escalate if there is no government in place before the end of the month, adding he expected the euro to target $1.28. Some US$4.01 billion in euros changed hands, using Reuters Dealing.
YEN RISES The yen had been higher for much of the session against the dollar and remained so against the euro after confirmation hearings of the government's nominees for two Bank of Japan deputy governor posts, which had been widely expected by the market. The Japanese government has signalled it wants the BOJ to pursue aggressive monetary easing to stimulate the economy, a stance that has weighed heavily on the yen since November. The euro was last down 0.2 percent at 121.57 yen. Analysts said the dollar's early drop against the yen was mostly a reflection of market positioning as traders were probably long dollar/yen going into Tuesday's confirmation hearings. Markets are now waiting for some actual policy action after such aggressive easing rhetoric for the dollar to make significant gains, they said. Some strategists, however, said that the dollar's ascent against the yen was intact and dips would provide a good chance to buy the pair. "Overall, we continue to view near-term pull-backs into the 91.80 yen area as providing buying opportunities," analysts at Morgan Stanley said in a note. Some US$2.2 billion in yen changed hands, using Reuters Dealing.