FOREX-US dollar slumps as talk of monetary easing weighs

* Euro breaks key resistance level vs dollar

* Euro/sterling surge spills over to euro/dollar pair

* Dollar/yen at new post-intervention low
(Rewrites, updates prices, adds quote)

By Gertrude Chavez-Dreyfuss

NEW YORK, Sept 28 (BestGrowthStock) – The dollar slumped on Tuesday
with prospects growing for additional monetary policy easing as
U.S. economic data, including consumer confidence, remained
weak.

The euro surged to a fresh, five-month high against the
greenback, smashing a key resistance level and option barriers
on its way up, a signal of further gains in the single
euro-zone currency.

The yen also firmed, pushing the dollar to below 84 yen,
its weakest since Japan intervened in the foreign exchange
market two weeks ago to halt its currency’s rise.

The Federal Reserve is likely preparing a fresh round of
quantitative easing measures to announce at the end of its Nov.
2-3 meeting, hedge fund advisor Medley Global Advisors said in
a report on Tuesday, a market source told Reuters.
[ID:nN28181349]

The Fed is also weighing a more open-ended, smaller-scale
bond buying program, the Wall Street Journal reported.

“The trend is still dollar-negative. Some kind of
quantitative easing is probably coming up,” said Kaz Shirai, a
forex interbank trader at Union Bank of California in Los
Angeles.

“There’s also been talk on Wall Street that $1 trillion may
be needed, and that’s still a lot of money. That’s pushing
10-year yields down, which helps dollar sellers.”

Shirai also said the resulting recovery in stocks has
brought out more risk-takers, with the euro and currencies such
as the Australian dollar benefiting. “We’re making a new high
on the euro,” he said, helped by some option-related buying.

The euro earlier broke a well-flagged resistance at
$1.3511, the 50-percent Fibonacci retracement of its fall from
$1.5145 last November to its June low around $1.1876.

The euro (EUR=EBS: ) rose as high as $1.3577, according to
electronic trading platform EBS, taking out barriers at
$1.3525. It was last at $1.3575, up 1.0 percent.

Gains in the euro accelerated after a weaker-than-expected
U.S. consumer confidence reading, its lowest level since
February. For details see [ID:nN28177460]

According to CitiFX, the next stop in euro/dollar is likely
the 55-week moving average which comes in at $1.3630. The bank
said there is solid resistance above that level, specifically
at $1.3670-$1.3740, where the highs from December 2004, April
2007, and March 2009 converge.

Brian Dolan, chief currency strategist at Forex.com in
Bedminster, New Jersey, said over the medium term he’s looking
for a rise in the euro to between $1.38 and $1.39.

“There are a few stopping points in between ($1.35 to
$1.38) but it could easily happen over the next few days as the
euro has gained nearly 5 percent over the last week or so. The
euro is the standout here.”

Analysts said gains in euro/sterling had also helped the
euro advance against the dollar. The euro surged against
sterling after Bank of England policymaker Adam Posen said the
British central bank should start pumping more money into the
economy. [ID:nLAC005768].

The euro rose to around 85.76 pence (EURGBP=D4: ) against
sterling, up 0.9 percent.

Against the yen, the greenback hit a low of 83.81 yen,
according to electronic trading platform EBS. The dollar last
traded at 83.91 yen (JPY=EBS: ), down 0.4 percent on the day.

With dollar/yen trading near the lows, investors are on
alert about possible intervention by Japan to stem the yen’s
strength, although Michael Woolfolk, senior currency strategist
at BNY Mellon in New York, said the pair needs to go lower in
order for Japanese authorities to step in.

“We have not heard enough from (Japan). They are sitting on
their hands for the time being, but we will get concerned if
(dollar/yen) gets close to 82. They do not want it to go
there.”

(Additional reporting by Steven C. Johnson and Nick
Olivari; Editing by Padraic Cassidy)

FOREX-US dollar slumps as talk of monetary easing weighs