The dollar came under pressure again today, losing some ground made from a bout of profit-taking on other currencies ahead of US jobs data and Group of Seven (G7) and IMF meetings later in the week.
The Japanese yen held near its 15-year peak against the dollar as traders are starting to feel that Japan may not intervene for now - at least not as aggressively as it did last month - to keep the yen's gains in check.
"There's speculation that, if the G7 wants a coordinated stance to put pressure on China to raise the yuan, then it becomes more difficult for Japan to intervene," said a dealer at a Japanese brokerage house.
Markets are wary that the G7 and IMF meetings starting today may produce a surprise in the way of a coordinated front on currencies, as calls have mounted for global efforts to avoid competitive currency devaluations.
This wariness helped to knock the euro off an eight-month high of $1.4030 hit on the EBS platform yesterday, though the euro resumed its uptick in Asian trade to mark $1.3945, up 0.1 per cent on the day.
Many market players think expectations of quantitative easing by the Fed will keep pushing the dollar lower, even though some traders were turning cautious, on the chance that surprise strength in US payroll data could set that scenario back.
Data yesterday showed US initial jobless claims hit a three-month low, although their four-week average, considered a gauge of their underlying trend, is showing no signs of a significant decline from recent levels.
The payroll data could change investor sentiment as stubbornly high unemployment is a major reason the market thinks the Fed will act.
But many market players also said a single month of strong job growth is unlikely to dispel expectations of more easing.
The dollar index against a basket of six currencies slipped 0.1 per cent to 77.35, edging towards an 8-½ month low of 76.906 hit yesterday.
It has support at 76.60, which is a low back in mid-January and the index low for 2010. Initial resistance is expected at 77.70, the top of yesterday's price action, and then 78.05-10, which was support at the start of October and in January.
Against the yen, the dollar traded at 82.36 yen, less than 30 pips from a 15-year low of 82.11 yen hit yesterday and edging ever closer to its 1995 record low of 79.75 yen.
On the charts, the initial downside target is 81.30 yen, with resistance expected at the former supports of 82.87 and Y83.15. Option barriers are lined up at 82 yen and below, which traders may try to trigger, although some said the dollar was more likely to stay above yesterday’s low before the US payroll data.
Japanese prime minister Naoto Kan said Japan will take decisive steps on forex if needed but added it also wants to cooperate with the G7 and other countries.
Traders think Japanese intervention will not go down well with other G7 members, which want emerging economies currencies, notably many in Asia, to strengthen more.
Ahead of the G7/IMF meeting, the People's Bank of China fixed the yuan's daily mid-point versus the dollar at a record high of 6.6830 today.
The Australian dollar was steady at $0.9820, after hitting $0.9918 yesterday, its highest in 28 years. Its hefty yield advantage means the currency is likely to keep attracting capital flows from an increasing number of low-yielding countries in the developed world.
Reuters