LONDON, Sept 9 - The dollar slipped against the euro and the yen on Tuesday as a dearth of U.S. economic data so far this week left the market hesitating whether recovery hopes might have got ahead of themselves. Analysts said there had been no data this week to offset the disappointment of poor U.S. employment figures released on Friday, and the dollar had failed to gain much benefit against the euro from Monday's strong stock market gains. "The market is starting to wonder whether the economic recovery still has the legs to run," said Peter Fontaine, currency strategist at KBC in Brussels.
"After disappointment on the payrolls we're not getting any data to counter this sentiment in the market. With nothing happening datawise we need to look to how equity sentiment evolves today." The dollar was a third of a percent lower on the day at $1.1106 per euro by 0740 GMT, after hitting a four month high around $1.0760 last week. It was down by a similar margin at 116.35 yen , just over half a yen above last week's 3-1/2 month low. The market remained wary that Japanese authorities could step in to sell yen for dollars as they have been detected doing several times over the past week in order to stem the yen's rise. U.S. stocks rose on Monday with the high-tech Nasdaq <.IXIC> ending 1.63 percent up at a 1-1/2 year high.
INTERVENTION WATCH
Traders say Japanese authorities could step in at any time to curb the export-damaging rise in the yen, given that its current level is slightly higher than Monday, when Japan is suspected of intervening. "The Japanese government will continue to intervene. So the dollar will stay in a range between 115 and 118.50 yen for a while," said Kota Kimura, an assistant manager at Shinkin Central Bank in Tokyo. But the Japanese currency remained well-bid because of renewed hope for Japanese shares. The key Nikkei average <.N225> surged over two percent to a 14-month high after Morgan Stanley raised its recommended exposure to Japanese stocks to "overweight" from "neutral".
"There is growing interest from foreigners in buying Japanese stocks and that is keeping the yen buoyant," said Hideaki Furumaya, head of the corporate desk at Trust and Custody Services Bank. Japanese machinery orders data for July came in slightly weaker than expected with core private-sector machinery orders, a key gauge of trends in capital spending, down 3.1 percent in July from a month earlier.
THIN DATA SCHEDULE
Some traders said the dollar was slightly weighed down by the second anniversary of the September 11 attacks on New York's World Trade Center and the Pentagon. In addition the only U.S. data due on Tuesday are wholesale inventories at 1400 GMT. In the euro zone, the first release of the region's second quarter gross domestic produce is due at 1000 GMT with the economy forecast to have contracted 0.1 percent on the quarter but grown 0.4 percent on the year. In the previous quarter the economy grew 0.1 percent on the quarter and 0.9 percent on the year.
Italian business confidence jumped to 95.3 from 86.7 in July, according to research institute ISAE.//