FOREX-Dollar languishes, euro heads up towards $1.40

* Euro extends gains after Fed minutes, Weber comments

* But $1.40 area remains hurdle

* Dollar up vs yen, at record low on Swissie, index soft

By Charlotte Cooper and Hideyuki Sano

TOKYO, Oct 13 (BestGrowthStock) – The dollar came under broad selling
pressure on Wednesday as investors sold it down in a bid to test
key lows against the euro, the Swiss franc and a basket of
currencies.

The euro looked set for a challenge of $1.40, with eyes on
its eight-month high at $1.4030, after Federal Reserve minutes
the day before reinforced expectations of more quantitative
easing.

But traders were cautious that uptrends against the dollar,
which revisited a record low against the Swiss franc, were
becoming stretched and the time for consolidation could be near.

Dealers said hawkish comments from European Central Bank
Governing Council member Axel Weber on Tuesday, which highlighted
the difference in direction between Fed and ECB policy, gave the
euro added lift, with talk of a big stop-loss buy order just
below $1.40.

But they cautioned that euro zone policymakers were likely to
be increasingly unhappy if the euro rose above $1.40 (EUR=: ).

“There’s a psychological resistance at around $1.40 as
(Eurogroup Chairman Jean-Claude) Juncker has said he was not
happy with the euro reaching that level,” a Japanese bank trader
said.

“Still, it’s hard to go long on the dollar when it’s so
obvious that the United States wants a weaker dollar.”

The euro rose 0.3 percent to $1.3965, triggering stop-loss
orders around $1.3950-60 before running into selling at
$1.3970-90. Resistance was expected at $1.3985, Friday’s session
high, with talk of more stop-losses lined up above that level.

Its $1.4030 high is seen as the target to beat if it is to
push higher rather than correct downwards. On the downside, its
200-week moving average sits at $1.3926.

It gained across the board, climbing against the yen and
sterling and the Swiss franc.

Robert Ryan, currency strategist at BNP Paribas in Singapore,
said even though the U.S. quantitative easing theme was starting
to look overpriced, the risk was that reserve management by Asian
central banks could keep the euro going.

“As long as the market continues to see the BOJ, the BOE and
the Fed pumping liquidity in, it’s going to go into emerging
markets and emerging markets are going to pump it back into the
euro,” Ryan said.

“The euro is the safety valve for all these adjustments.”

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Currency tensions map: http://r.reuters.com/jec96p

PDF report on currencies: http://r.reuters.com/gez77p

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REBOUND IN THE OFFING?

Minutes of the Fed’s Sept. 21 meeting showed officials
thought the struggling U.S. recovery might soon need more help
and they discussed several ways to provide it, including possible
adoption of a price-level target and the possibility of buying
more longer-term U.S. government debt. [ID:nN12188145]

In contrast, Weber said the ECB’s government bond-buying
programme has not worked and should be scrapped. [ID:nN12121001]

The market has become very short dollars on QE expectations,
raising the risk of a rebound as it becomes harder for players to
sell it down further.

“We are due for a short cover — we’re definitely due for
something. That might well be in the last quarter of the year but
there are no catalysts around at the moment,” said Robert Reilly,
co-head of flow fixed income and FX for Asia at SG CIB.

A rise in U.S. Treasury yields, coming on the back of a
lacklustre debt sale, failed to give the dollar much of a boost
against the yen and it languished near a nine-month trough
against a basket of currencies (=USD: )(.DXY: ).

The dollar index (Read more about the global trade. ) fell 0.2 percent to 77.139, not far above
the nine-month low of 76.906 set last week. However it has now
bounced off the 76.90 area twice in the past week.

It also eased to a record low of 0.9553 Swiss francs (CHF=: )
while the Australian dollar (AUD=D4: ) edged back towards last
week’s 28-year high of $0.9918.

But the dollar firmed 0.2 percent against the yen to 81.83
yen (JPY=: ), supported by nervousness that Japanese authorities
could intervene the closer it gets to its record low of 79.75
yen. Finance Minister Yoshihiko Noda said in parliament that he
could not answer whether or not Japan would conduct intervention.

The dollar hit a 15-year low of 81.37 yen on Monday.
(Editing by Chris Gallagher)

FOREX-Dollar languishes, euro heads up towards $1.40