The euro rose about half a cent on Tuesday as the dollar struggled to regain its footing after last week's surprisingly weak U.S. jobs data dimmed chances of an early rate rise by the Federal Reserve. Against the Japanese currency, the dollar steadied one yen below its latest five-month peak as caution over Japanese intervention lingered even after the Bank of Japan (BOJ) was thought to have withdrawn dollar bids the previous day. "The market hasn't turned bullish on the euro but we've clearly moved away from a possible break under $1.2 (per euro)," said a senior trader at a U.S. bank. "With no major economic data due for a while, we should see some range-bound trading." By 0554 GMT, the euro had pushed up to $1.2443/48 , up 0.3 percent and extending gains since it hit a three-month low of $1.2056 last week.
Sterling was also up three percent at $1.8565/70 . The dollar was a tad firmer at 111.28/31 yen versus 111.16/24 in late U.S. trade on Monday, but it was off its five-month high of 112.34 yen hit in London on Monday. Much weaker-than-expected machinery orders data, a key leading indicator for capital spending in Japan, had a limited impact on the Japanese currency, pushing it down about 0.1 yen against the dollar. Core private-sector machinery orders in January fell 12.2 percent, compared with economists' forecast for a fall of one percent fall. Traders said the dollar's direction against the yen would likely be largely dictated by Japanese intervention for now.
YEN SWAYS ON BOJ
The U.S. unit tumbled a full yen in New York on Monday as talk swirled that Japan -- widely suspected of intervening intermittently since Friday -- had halted buying dollars. "They may have stopped intervention but there is also talk that it is still placing dollar bids around 111 yen," said Toshihiro Azuma, forex manager at Sumitomo Trust and Banking Corp. "I don't think the dollar will fall below 111," he added. Finance Minister Sadakazu Tanigaki declined to comment on whether Japan had intervened recently. Japan sold 10 trillion yen ($89.9 billion) in the first two months of this year, on top of a record 20 trillion yen last year to prop up the dollar and curb the yen's export-damaging rise. Still, traders said the dollar appeared to be losing momentum as the recent weak U.S. payroll data suggested that the Fed would likely keep the benchmark interest rate at the current low level of one percent for some time. That is likely to discourage foreign investors' buying of U.S. bonds at a time when the United States desperately needs foreign capital to finance its huge current account deficit. The dollar, meanwhile, hardly reacted to comments from U.S. Treasury Secretary John Snow, who said on Monday that the economy remains "unusually sound". Snow, who is slated to speak again at 1430 GMT, also reiterated that the Bush administration advocated a strong dollar and said currency intervention should be kept to a minimum. In Europe, German industrial production data for January is due at 1100 GMT. Output is seen up 0.1 percent from the previous month. ($1=111.23 yen)///