By John Walsh
London, May 15 (BridgeNews) - The U.S. dollar began the European session looking poised to extend Tuesday's gains against other majors on the back of the Federal Reserve's 50-basis-point interest rate cut. But as the morning unfolded the opposite happened and both the euro and the yen firmed against the greenback. A procession of poor euro-zone data should have weakened the single currency, but large euro/dollar and euro/yen orders buoyed both currencies.
U.S. data for the day was generally favorable.
* * * The U.S. dollar began the European session at 0.8748 against the euro. It looked as if the pair would eye the 0.8690 2001 low, but it climbed to an intraday high of 0.8864, surprising the market.
Traders reported supply emerging at this level, which sent the pair tumbling back toward the 0.8810-20 level. But the euro rose again throughout the afternoon to trade near its intraday high. A large euro/dollar order was said to be worth $2 billion and rumored to be the proceeds of France Telecom's and Deutsche Telecom's disposal of their stake in U.S. telecommunications operator Sprint.
The healthy bounce in euro/yen was attributed to buying from European central banks as the pair climbed from 108.13 to 109.22. But a combination of players being caught long and Swiss and corporate selling pushed dollar/yen off its opening high of 124.03. The pair dipped to 123.10 before making a modest recovery.
Better-than-expected U.S. inflation data and a buoyant U.S. housing market figure for April failed to lift the dollar against other currencies.
Cable rose to 1.4306 from 1.4214, although the U.K. did see some positive labor market and average earnings figures in the morning. The Australian and New Zealand dollars made recoveries after Tuesday's losses. They went from 0.5190 to 0.5240 and 0.4183 to 0.4219 respectively. The greenback slid from 1.5476 to 1.5429 against the Canadian dollar amid mixed Canadian economic data.
Euro/sterling had a choppy day, trading in the 0.6154 to 0.6208 range.