LONDON, Oct 30 - The dollar slid back towards a three-year low against the yen on Thursday as traders waited to see if U.S. Treasury Secretary John Snow would criticise Japan for its efforts to curb yen strength. Snow testifies in a Senate hearing at 1500 GMT on exchange rate policy. Any explicit mention of Japan's recent yen selling/dollar buying forays would underscore concern Washington is looking for a weaker currency. "Snow will be under pressure to comment on Japan's currency manipulation in the question and answer session even if he doesn't in the speech itself," said David Mann, foreign exchange strategist at Standard Chartered. "The risk is the dollar could weaken on any such comments." The dollar was down a third of a percent at 107.98 yen by the European midsession, a whisker above three-year lows hit on Wednesday. It also fell a quarter-percent against the euro, lifting the single currency to session peaks just above $1.1700 . The euro toyed with eight-week lows against the yen in early trade before recovering to stand little changed on the day.
U.S. gross domestic product data for the third quarter is due at 1330 GMT and is expected to show growth of six percent or more. Weekly jobless claims are also due for release. AUSSIE SURGES Buoyant gold and commodity prices and the prospect of higher interest rates lifted the Australian dollar above US$0.7090 for the first time in six years. The Reserve Bank of Australia meets on November 4, two days before the Bank of England, and some suspect the RBA may be the first major central bank to raise rates this cycle. "Higher rates are still the story here," said Jim Webber, chief economist at TD Securities. "Speculation is growing that the Reserve Bank of Australia will hike rates sooner rather than later." Higher yielding currencies have been on a roll against the U.S. currency this week after the U.S. Federal Reserve left rates unchanged and reiterated a dovish outlook. Sterling, which has also benefited from bets on higher interest rates, held close to five-year highs against the greenback set in the previous session, while the New Zealand and Canadian dollars also held within sight of recent multi-year peaks.
INTERVENTION CONCERNS
Although the greenback was weighed down against the yen by speculation that Snow would criticise Japanese intervention, few traders were ready to sell aggressively, believing the Japanese authorities would step in again to prop up the dollar. According to market sources, Japan intervened in the foreign exchange market from early Tuesday to late Wednesday. Many traders say the Bank of Japan probably bought the dollar around and below 108 yen when it was hitting new three-year lows. Japan has thrown more than 13.5 trillion yen at the currency markets so far this year, fearing a rise in the currency would jeopardise Japan's export-led recovery. The dollar has declined for several months on the belief that Washington is seeking a weaker currency -- despite its official strong-dollar policy -- to help its exports and to curb a growing U.S. current account deficit. Its fall accelerated after the Group of Seven leading industrial countries met in September, as the group's statement calling for flexible foreign exchange was interpreted as criticism of Japan's intervention.//