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FOREX-Dollar slips as investors lock in gains before US jobs data

Lisa Twaronite and Ian Chua
Wednesday, 4 Dec 2013 | 1:10 AM ET

* Yen stays off of recent 5-year low vs euro

* Aussie tumbles to 3-month low after GDP disappoints

* Canadian dollar still shaky as BOC policy meeting looms

TOKYO/SYDNEY, Dec 4 (Reuters) - The dollar retreated against the yen and a basket of currencies in Asia on Wednesday as investors locked in profits ahead of major risk events including U.S. jobs data due later in the week.

The Australian dollar, meanwhile, tumbled to a three-month low after Australia's July-September gross domestic product growth failed to meet market expectations.

"Dollar/yen had a good run. I think 103 was a level a lot of people were looking at as a target, and we hit it, so I think people are happy to take profits," said Bart Wakabayashi, head of forex at State Street Global Markets in Tokyo.

"We're hearing a lot of selling on this move back to 102.50 today. I think there might be a short-term strategy shift in terms of squaring up those long positions," he added.

The dollar slipped to 102.24 yen from a six-month peak of 103.38 yen set on Tuesday, though it recovered to trade nearly flat on the day at 102.49 yen. The euro slipped slightly to 139.26 yen after falling as low as 138.93 earlier, from a five-year high of 140.03 yen hit on Tuesday.

The euro was steady against the dollar at $1.3589, not far from one-month high of $1.3622 hit last week. The dollar index, which tracks the U.S. unit against a basket of major rivals, lost about 0.4 percent to 80.627.

Data on U.S. gross domestic product on Thursday and the nonfarm payrolls report on Friday could provide clues about the U.S. Federal Reserve's outlook for tapering its stimulus, ahead of the central bank's next policy meeting on Dec. 17-18.

Many investors and analysts expect the Fed to begin reducing its stimulus at its March meeting, so an upbeat employment report would increase speculation that such tapering could come earlier.

Economists polled by Reuters forecast U.S. employers likely added 180,000 workers in November, following October's 204,000 increase, which showed surprising resilience considering the 16-day government shutdown that month that led to the furloughs of hundreds of thousands of federal workers and contractors.

BOJ POLICY

By contrast, the Bank of Japan is likely to maintain its ultra-easy monetary stance as it aims for its target of 2 percent inflation within two years. Investors have been selling the yen to fund purchases of riskier assets in carry trades, thanks to the BOJ's policy and speculation it may do more.

But BOJ board member Takehiro Sato told business leaders on Wednesday that he saw no need to expand monetary stimulus pre-emptively to counter the pain to the economy from next year's Japanese sales tax hike, apparently seeking to dispel any speculation of a expansion of its ultra-easy policy anytime soon.

While the major central banks are widely expected to keep interest rates unchanged, investors suspect the Bank of Canada will strike a more dovish tone.

The Bank of Canada will release its interest rate and policy decision on Wednesday following its first meeting since a policy shift in October, when the central bank dropped any mention of a rate hike.

The recent policy shift pushed out market expectations for the next rate hike into 2015, so the Canadian central bank is seen as all but certain to hold rates at 1 percent, where they have been since 2010.

As a result, investors have been selling the Canadian dollar in the last few days, knocking it to a three-year low at C$1.0673 per U.S. dollar on Tuesday.

The Reserve Bank of Australia kept its cash rate steady at a record low of 2.5 percent on Tuesday, and reiterated that the local currency remained "uncomfortably high".

The Aussie skidded 1 percent on the day on Wednesday to $0.9045, its lowest since early September, after data showed the economy grew 0.6 percent in the third quarter, falling short of forecasts for 0.8 percent growth.

It was last down 0.8 percent at $0.9062. A sustained break below $0.9050/55, an area of major support, could see a retracement all the way to this year's low of $0.8848.