28 August 2003, 13:55  Euro slippage resumes as market eyes US data

LONDON, Aug 28 - The euro slipped towards this week's four-month low on the dollar and five-month low on the yen on Thursday as profit-taking on recent dollar gains subsided in anticipation of upbeat U.S. economic numbers. The dollar has risen 10 cents on the euro since June as investors shifted out of defensive trades in euro zone government debt set up earlier this year and into riskier equity markets, emboldened by rising confidence in a global economic recovery.
"The dollar stalled in recent days with the market being a little long of dollars but the risk of profit-taking seems limited given that we expect to see strong numbers in the U.S. today and tomorrow," said Mitul Kotecha, head of global foreign exchange research at Credit Agricole Indosuez. "The trend of selling of bonds and buying equities remains very firm indeed and that underscores the view this is a dollar positive environment." By 0750 GMT, the euro had shed nearly a quarter percent on the day to $1.0853 . It dipped as far as $1.0789 on Tuesday. Against the yen it was 0.1 percent lower on the day at 127.61 yen after grazing a low of 126.72 on Tuesday. The dollar was firm at 117.57 yen , nearly half a yen above a five-week low set on Monday.
The U.S. Commerce Department releases its second estimate of second quarter gross domestic product (GDP) growth at 1230 GMT. Economists in a survey forecast a 3.0 percent annualised pace of growth compared with 2.4 percent in the first estimate. Weekly jobless claims are due at the same time and forecast at 390,000 new filings compared with 386,000 in the prior week. With downward pressure coming from expectations of firm U.S. numbers, the euro found some support in talk that Japan may have conducted yen-selling, euro-buying intervention after warnings the previous day from its forex chief Zembei Mizoguchi about the single currency's rapid moves.
"Many foreign players took Mizoguchi's comments on the euro as a hint that Japan has also been buying euros to stop the yen's appreciation," said Junya Tanase, global markets officer at JP Morgan Chase in Tokyo. Mizoguchi again talked about the euro on Thursday, saying large swings in the euro/yen rate were undesirable. The yen's recent advances have been stalled by caution about possible intervention by Japanese authorities, which spent about nine trillion yen ($76.6 billion) in the first seven months of the year to prevent a higher yen from choking off Japan's nascent economic recovery. The Finance Ministry is due to release intervention figures for August on Friday.
Analysts expect Japan to have spent one to two trillion yen to hold its currency down in August after selling 2.0272 trillion yen in July. The Tokyo stock market's Nikkei average <.N225>, which rose to 13-month highs on Wednesday, faltered to finish lower on Thursday, helping to reduce upward pressure on the yen for now. Finance Ministry data showed early on Thursday that foreign investors were net buyers of Japanese equities last week for the 19th straight week, increasing their purchases to a net 634.5 billion yen from 450.0 billion yen the week before.//

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