TOKYO, Dec 9 - The dollar was a tad softer on Tuesday, humbly sitting just above multi-year lows it had plumbed against other major currencies a day earlier as the market awaited a key U.S. Federal Reserve meeting. Having fallen to record lows against the euro for seven straight trading days by Monday, the momentum was decidedly bearish, with no relief in sight for concerns about Washington's handling of post-war Iraq and the bulging U.S. trade deficit. In addition, a spectacular jump in Japanese machinery orders, an early pointer for capital spending, mitigated a downward revision to Japan's third quarter growth figures earlier, pushing the dollar closer to Monday's three-year lows against the yen. "The figures underscored the view that even though Japan's growth may have slowed in the third quarter, it is picking up again. There's no question they are yen-bullish," said Junya Tanase, global markets officer at JP Morgan Chase. "But much more than that, it seems that the dollar's across-the-board weakness is gathering pace." In addition to its losses against the euro and the yen, the dollar came within a whisker of Monday's five-year lows against sterling and eyed a further fall to its lowest since the aftermath of Black Monday in 1992, when the pound fell out of the European exchange rate mechanism. Sterling stood at $1.7349/53 at 0625 GMT, within reach of five-year highs around $1.7360 . A breach of $1.7366 would bring the British currency to its highest level since the 1992 pound crisis.
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The euro stood at $1.2226/31 , virtually unchanged from late New York levels on Monday, when it rose as high as $1.2240. That was the highest level since the January 1999 launch of the single European currency, which was introduced at around $1.1740 and fell to a record low around $0.8225 in October 2000. "It's been down for seven consecutive days, so it's about time we saw some correction. But it's hard to believe that the market's sentiment will suddenly change today," said Shogo Nagaya, foreign exchange manager at Nomura Trust & Banking. The dollar fell as low as around 109.15 yen , down marginally on the day and within striking distance of three-year lows set on Monday around 107.10 yen. It dipped by 0.15 yen or so after data showing Japanese machinery orders jumped 17.4 percent in October from a month earlier and 23.1 percent from a year earlier. The figures wiped out concerns that an incipient recovery in capital expenditure had already peaked out -- a view fuelled by a downward revision earlier in the day to Japan's July-September growth figures mainly on a revision to the capital spending component.
Japan's third quarter growth was revised down to 0.3 percent in real terms from the previous quarter, compared with a preliminary reading of 0.6 percent growth. On an annualised basis, the revised growth rate was 1.4 percent -- nowhere near the United States' 8.2 percent annual rate. Japanese Finance Minister Sadakazu Tanigaki ventilated his frustration at the yen's export-crimping strength, saying recent exchange rate moves had deviated from economic fundamentals and that the U.S. economy remained strong. For now the market's focus was squarely focused on the Fed's policy meeting. Although the Fed was expected to keep rates unchanged, the market was awaiting the Fed's statement afterwards for clues on next year's policy. In particular, the market was keeping a close eye on whether the Fed drops the phrase about interest rates staying low for a "considerable period" -- signalling an earlier-than-expected credit tightening next year. Tanase at JP Morgan said his firm was of the view that the language would be changed and that such a move could help the dollar rebound. "There is a possibility that the dollar could bounce, but whether that would change the overall downtrend is another question," he added.//