FOREX-Dollar’s bounce runs out of steam, euro gains

* Dollar index lower, dlr/yen back below 84 yen

* Euro rises, boosted by rally in the euro/Swiss franc cross

* China data, Dubai World deal supports commodity currencies

(Recasts, adds quotes, updates prices)

By Anirban Nag

LONDON, Sept 10 (BestGrowthStock) – The dollar gave up most of its
gains versus the yen on Friday, heading towards 15-year lows and
keeping intervention prospects alive, while the euro rallied
against the Swiss franc as investors sold safe-haven currencies.

Chinese trade data which showed higher-than-expected imports
for August along with news that Dubai World had reached a deal to
restructure liabilities boosted risk demand and pushed
currencies such as the Australian dollar higher.

The dollar fell against a basket of currencies (.DXY: )
(=USD: ), having failed to hold above the index’s 55-day moving
average at 82.80. Against the yen, the dollar was off its
session highs of 84.28 yen (JPY=: ), falling to 83.90 yen.

It rose earlier in the session, helped by an increase in
U.S. Treasury yields on Thursday on U.S. jobs data.

“There has been a moderate improvement in risk appetite
which is seeing the dollar fall,” said Daragh Maher, deputy head
of global foreign exchange research at Credit Agricole CIB. “But
it is still very quiet there and its unlikely to lead to any
trend.”

The euro was up 0.25 percent at $1.2727 (EUR=: ), helped
mostly by its gains against the Swiss franc.

It rallied more than 1 percent against the franc, which came
under selling pressure due to the rise in risk appetite. The
euro (EURCHF=: ) hit the day’s high of 1.3050 francs, according to
Reuters data. Traders cited Swiss banks selling the safe-haven
franc against the euro, dollar and other currencies.

But strategists remained sceptical about the euro’s gains,
given the euro zone periphery’s debt worries and banking sector
problems surfacing again.

“It is a risk-on environment which is helping the euro, but
clearly structural problems remain given widening spreads and
well known problems about its banking sector,” said Simon
Derrick, head of currency research at Bank of New York Mellon.

His bank’s data showed demand was not recovering for markets
like Greece, Italy and Portugal.

LEADERSHIP RACE TO SWAY YEN

The shift away from safe-haven currencies also kept the yen
under pressure against the higher-yielding currencies and the
euro (EURJPY=R: ). But the yen managed to pare some of its losses
against the dollar as Japanese authorities kept up their
rhetoric about intervention in the currency market.

The dollar hit a 15-year low of 83.34 yen this week,
intensifying speculation that Japan might step in to curb yen
gains if the move accelerated towards 80 yen. Prime Minister
Naoto Kan reiterated on Friday that authorities would take
decisive steps on the yen if needed.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ PDF presentation on the yen: http://r.reuters.com/mam52p TAKE-A-LOOK on Japan politics [nPOLJP] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Attention was turning to a ruling party leadership race on
Sept. 14 in which Kan faces a challenge from powerbroker Ichiro
Ozawa.

A Reuters poll showed a win by Ozawa in the vote, which
would also decide who is prime minister, would likely give a
short-term boost to stocks but weaken Japanese government bonds
and the yen. [ID:nTWKAKE617]

Ozawa has said Japan should intervene to weaken the yen, and
while some analysts say intervention would be difficult without
support from Washington, others say Tokyo under Ozawa would be
more likely to take action if the yen strengthens.

“So the chances of intervention will rise as compared to the
period under Kan,” said Masafumi Yamamoto, chief FX strategist
Japan at Barclays Capital in Tokyo.

(Additional reporting by Hideyuki Sano in Tokyo)

FOREX-Dollar’s bounce runs out of steam, euro gains