FOREX-Dollar hits fresh 2-month low vs yen, U.S. GDP disappoints

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Mon Apr 30, 2012 2:11am EDT
* Disappointing U.S. growth keeps dollar under pressure
* Dollar hits 2-mth low vs yen, 8-mth low vs sterling
* Japanese exporters' offers weigh on dollar/yen -trader
By Masayuki Kitano and Ian Chua
SINGAPORE/SYDNEY, April 30 (Reuters) - The dollar hit a fresh two-month low versus the yen and eight-month trough against sterling on Monday, staying under pressure after data last week showed disappointing first-quarter U.S economic growth.
The dollar fell to 80.08 yen at one point on trading platform EBS, its lowest level since late February, and last stood at 80.14 yen, down 0.2 percent from late U.S. trade on Friday.
The dollar has come under broad pressure after data on Friday showed U.S. economic growth cooled in the first quarter partly as businesses cut back on investment, bolstering the Federal Reserve's case that interest rates should be kept near zero at least through late 2014.
The slowdown also kept alive market speculation that the Fed may eventually launch another bond buying programme, or a third round of quantitative easing.
"A flavour of QE is back in the air, driving the USD lower and risky assets higher," said Sebastien Galy, strategist at Societe Generale.
That would go some way in explaining why sterling has outperformed the U.S. currency, despite Britain's double-dip recession. In fact, sterling's fortunes appeared to have turned a corner and currency speculators are now betting on further gains.
Sterling rose to $1.6289 at one point, its highest level since late August 2011. Sterling last stood at $1.6286, up 0.2 percent from late U.S. trade on Friday.
EYES ON U.S. DATA
The dollar is likely to take cues later this week from a batch of U.S. economic data, including the Institute for Supply Management's (ISM) gauges of the manufacturing and services sectors, as well as U.S. jobs data.
"Clearly if we do get a weak ISM and a 125,000 (increase in payrolls), this dollar weakness is going to continue," said Rob Ryan, FX strategist at BNP Paribas in Singapore, adding that economists at BNP Paribas were predicting an increase of 125,000 U.S. jobs in April.
Such an outcome would be lower than the prevailing market expectation for an increase of 170,000 jobs.
Market players said the dollar may drop further against the yen in the near term.
"The chances of USD/JPY breaking 80 and continuing on a downtrend is quite large," Tohru Sasaki, head of Japan rates and FX research at JPMorgan Chase Bank in Tokyo, said in a research note.
The dollar has been under broad pressure recently due to a drop in U.S. Treasury yields, Sasaki said. On Friday, the 10-year Treasury yield dipped to as low as 1.884 percent , its lowest level in nearly three months.
Other factors that suggest the dollar may stay under pressure against the yen include the existence of sizeable short positions in the yen, a lack of interest in foreign bond investment among Japanese investors, and the low probability of yen-selling intervention, Sasaki said.
The euro held steady at $1.3254, having retreated from a three-week high around $1.3270 hit on Friday.

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