FOREX-Dollar pushes back, market weighs QEII vs euro debt

* Euro slips, edges down towards channel support at $1.3335

* Bernanke: may buy more assets; QEII not automatic

* Euro zone finance ministers to meet later on Monday

By Charlotte Cooper

TOKYO, Dec 6 (BestGrowthStock) – The dollar on Monday recouped some
ground lost from a renewed focus on U.S. quantitative easing, and
was helped by short covering, while the euro fell (Read more about the trembling euro. ) back towards
channel support ahead of a meeting of European finance ministers.

The greenback pulled up off a three-week low against the yen
and two-weeks lows against the euro set on Friday after
disappointing U.S. jobs data and a report that Federal Reserve
Chairman Ben Bernanke did not rule out bond purchases beyond
those planned.

The comments, which were then aired on Monday, served as a
reminder that the Fed’s second round of quantitative easing, in
which it plans to buy $600 billion in assets, remains a weight on
the greenback, although the resulting easy liquidity is
supportive of risk trades.

As the dollar shed 1.5 percent against the yen on Friday and
more than 1 percent against a basket of currencies, it had scope
for a bounce in thin volume on Monday, analysts said.

“Friday’s moves were so rapid that it is natural to have a
bit of position unwinding,” said Keiji Matsumoto, strategist at
Nikko Cordial Securities.

“There’s also a feeling that there could be more bad news
from the euro zone,” Matsumoto added,

The dollar rose 0.4 percent to 82.88 yen (JPY=: ), climbing off
Friday’s three-week low of 82.52 yen, and it gained 0.3 percent
on the index.

Still, just as euro zone debt concerns return periodically to
dog the euro, U.S. asset-buying will haunt the dollar.

“The market is going to continue to view U.S. quantitative
easing as being a driving force,” said Greg Gibbs, FX strategist
at RBS in Sydney.

Bernanke said it could be four to five years before the U.S.
returned to a more normal jobless rate but that a double-dip
recession was not likely. [ID:nN05271909]

With QEII on track, commodity-linked and higher-yielding
currencies such as the Australian and New Zealand dollars kept
some of the gains they made on Friday against both the dollar and
yen. Gold and silver were buoyant, with silver (XAG=: ) at its
strongest levels since early 1980.

The Australian dollar, which surged 1.7 percent to $0.9938
(AUD=D4: ) on Friday, gave back 0.4 percent to $0.9892 and ticked
up 0.2 percent on the yen at 81.97 yen (AUDJPY=R: ).

The euro, battered in November by worries about peripheral
euro zone economies’ debt levels, had also found support last
week from European Central Bank purchases of peripheral
economies’ bonds.

But after climbing 1.5 percent on Friday and reaching as far
as $1.3438 (EUR=: ), it beat a retreat on Monday, but managed to
hold above support at around $1.3335 from a rising channel on its
hourly charts.

AUTOMATIC STOPS

Dealers said automatic sell stops also lay at about
$1.3330/35.

Euro zone finance ministers meet later on Monday and will
face pressure to increase the size of a 750 billion euro ($1,006
billion) safety net for crisis-hit members in order to halt
contagion in the single currency bloc.

That will be followed by a meeting on Tuesday of ministers
from the broader 27-nation European Union, who are expected to
formally approve an 85 billion euro aid package for Ireland and
discuss the reform of EU budget rules. [ID:nLDE6B40EJ]

“Given how frail sentiment remains, the market is holding out
hope for some broader plan to be put in place and a widening of
that stability fund in case another one of the peripherals falls
over,” said Sue Trinh, currency strategist at RBC in Hong Kong.

The dollar index (Read more about the global trade. ), a gauge of its performance against six
major currencies, was hovering just above a two-week low of
79.063 set on Friday (.DXY: )(=USD: ).
(Additional reporting by Hideyuki Sano and Yoko Matsudaira;
Editing by Edwina Gibbs and Joseph Radford)

FOREX-Dollar pushes back, market weighs QEII vs euro debt