Yen Stays Stronger Before BOJ Meeting; Aussie Near 4-Mont.

The yen was 0.5 percent from a two- month high against the dollar as a rally in stocks around the world spurred speculation the Bank of Japan (8301) will refrain from additional monetary easing at a policy meeting this week.

The euro was 0.4 percent from the strongest in a month versus the greenback after German Chancellor Angela Merkel’s government backed the European Central Bank’s bond-buying plan. Australia’s dollar appreciated to a four-month high after the nation’s central bank kept interest rates at 3.5 percent at a policy meeting today.

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The yen was little changed at 78.24 per dollar at 8:26 a.m. in Tokyo from yesterday when it rose 0.3 percent to 78.25. Photographer: Tomohiro Ohsumi/Bloomberg

“The Bank of Japan looks set to keep policy unchanged,” saidMike Jones, a currency strategist at Bank of New Zealand in Wellington. “Without any impediment from the Bank of Japan, we’ll see more of the same, that gradual grind lower in the next few sessions and coming months for dollar-yen.”

The yen was little changed at 78.27 per dollar at 8:06 a.m. in London after rising to 77.91 on Aug. 1, the strongest since June 1. Japan’s currency fell 0.1 percent to 97.17 per euro. The euro was little changed at $1.2407 after rising to $1.2444 yesterday, the highest level since July 5.

The MSCI Asia Pacific Index (MXAP) of shares gained 0.6 percent, after the MSCI World Index (MXWO) rose 0.7 percent yesterday.

The BOJ probably won’t change its view that Japan’s economy is picking up moderately, the Nikkei newspaper reported, without saying where it got the information. All 17 economists in a Bloomberg survey forecast the central bank will keep its benchmark overnight target rate at 0.1 percent at its two-day meeting starting tomorrow.

New Members

This will be the first central bank meeting with new board members Takahide Kiuchi and Takehiro Sato, who have both signaled willingness to consider fresh forms of easing.

The two “are known to be sympathetic to more unconventional easing, but like the RBA, a ‘wait and see’ stance by the BOJ is more likely now,” according to a research note from Brown Brothers Harriman & Co. analysts, including New York- based Marc Chandler, global head of currency strategy.

Finance Minister Jun Azumi told reporters in Tokyo that Japan will extend a facility to counter yen gains through fiscal year 2012. The International Monetary Fund said last week the currency is “moderately overvalued.”

Government data in February showed Japan last year carried out so-called stealth intervention, where officials refrain from confirming yen sales on the day they were executed. The nation sold 1.02 trillion yen against the dollar on the first four days of November in addition to 8.07 trillion yen on Oct. 31, the data showed.

‘Some Risks’

“There are some risks of currency intervention if the yen strengthens beyond 78 per dollar, and that’s keeping the currency on the back foot,” said Daisaku Ueno, a senior currency and debt strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “The government and the BOJ carried out stealth intervention last year around that level, and global opposition against currency intervention has eased somewhat.”

The yen has appreciated 3.7 percent in the past three months among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has fallen 4.3 percent, and the dollar has gained 1.3 percent.

Demand for the euro was supported after Merkel’s government backed ECB President Mario Draghi’s proposals on bond buying to help bring down borrowing costs in Spain and Italy. Germany is “not worried” by Draghi’s announcement of Aug. 2, deputy Merkel spokesman Georg Streiter told reporters in Berlin yesterday, when asked whether the government is concerned the ECB’s independence may be compromised.

Bailout Fund

Draghi outlined a plan last week under which the ECB may buy debt of struggling euro-bloc countries in tandem with the euro area’s bailout fund, while saying the details still need to be worked out over the coming weeks.

“The fact that the German spokesperson made an official statement for the first time about the country’s backing of ECB’s bond purchases is supporting the euro,” said Ken Takahashi, assistant vice president of global markets at Sumitomo Mitsui Trust Bank Ltd. in New York. “The market is reassessing the ECB’s decision from last week and taking a more positive view on it.”

Italy’s Monti said disagreements within the euro area were detracting from the policy response to the debt crisis, according to an interview with Germany’s Der Spiegel magazine published Aug. 5.

Australia’s dollar climbed to the strongest since March after the Reserve Bank said current policy settings were “appropriate.”

The so-called Aussie rose against most of its major counterparts after RBA Governor Glenn Stevens and his board said in a statement the nation’s growth was close to trend.

“The RBA hasn’t really set out a case for lowering interest rates, so I suspect that’s probably maybe a surprise to the markets,” said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore. The overall statement “seemed to be quite bullish for the Aussie dollar.”

Australia’s dollar rose 0.2 percent to A$1.0587 after reaching $1.0603, the strongest level since March 20.

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FOREX-Euro pulls back from 1-mth high; Aussie edges higher

* Talk of euro option barrier at $1.2450

* Aussie hits 4-month high, RBA holds rates steady

SINGAPORE, Aug 7 (Reuters) - The euro dipped versus the dollar on Tuesday and pulled back from a one-month high, but remained supported by expectations that the European Central Bank will take action soon to lower borrowing costs for Spain and Italy.

The Australian dollar hit its highest level in more than four months after the central bank kept interest rates unchanged at 3.5 percent and dropped few hints that it was in a hurry to ease again.

Hopes that the ECB will soon act to reduce crippling Spanish and Italian borrowing costs have sparked a global rally in risky assets since Friday and given a lift to the euro as well as the Australian dollar.

Although details of exactly how the ECB will stabilise the euro zone's bond markets have yet to be fleshed out, traders and analysts say the euro may eke out further gains in the near term due to hopes for such action.

The euro eased 0.2 percent to $1.2380, having hit a one-month high of $1.2444 on Monday on trading platform EBS, its highest level since early July.

"I think the risk or the bias here is perhaps a bit more short squeeze in the euro to the upside," said Sim Moh Siong, FX strategist for Bank of Singapore, referring to the possibility of the euro getting a lift if traders with short positions in the single currency unwind their bearish bets.

The market will be watching to see whether Spain or Italy decide to ask for help from the euro zone's bailout funds, he said, adding that such action could help open the way for the ECB to buy bonds via the new scheme that it is now considering.

The euro is likely to face initial resistance at around $1.2450 to $1.2480, and if it breaks above that area, the single currency could try for levels above $1.2600, he added.

There was some market talk of an option barrier in the euro at $1.2450. The existence of such a barrier suggests that options players may sell the euro if it climbs close to the barrier, but also means the euro's rise could gain steam if the barrier level is actually hit.

AUSTRALIAN DOLLAR

The Australian dollar rose to as high as $1.0603, its highest level since March 20, after the Reserve Bank of Australia (RBA) kept its main cash rate steady, saying it was too soon to gauge the full impact of past interest rate cuts.

The Aussie dollar last stood at $1.0567, steady from late U.S. trade on Monday.

The RBA's reference to the Australian dollar in its accompanying statement caught the attention of some analysts. The central bank said the Australian dollar's exchange rate remains high despite a drop in the terms of trade.

"It seems to be a new line from them, that there may be more of a divide between underlying fundamentals and the strength in the exchange rate," said Todd Elmer, currency strategist at Citi in Singapore.

However, there probably isn't much that the RBA can do to oppose the strength in the Aussie dollar, Elmer said.

"If we do see any dips in the Aussie on the basis of this type of language I would treat that as a buying opportunity," he added.

The U.S. dollar edged up 0.1 percent to 78.29 yen, staying above a two-month low of 77.90 yen struck last week.

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European shares, euro firm as ECB support looms

European shares tiptoed around four-month highs and the euro remained buoyant at $1.24 on Tuesday, as the prospect of formal central bank support for euro zone bond markets in the coming weeks kept markets cautiously optimistic.

Markets have enjoyed a strong run in recent days after robust U.S. jobs data eased concerns about global growth, and the Frankfurt-based European Central Bank promised to bring control back to strained parts of government borrowing markets.

"Markets are likely to remain driven by headlines (on the euro zone crisis), waiting for action before distinctly moving in either direction," said Bill O'Neill, Chief Investment Officer for Europe, Middle East and Africa, Merrill Lynch Wealth Management.

"The lack of a large-scale policy response continues to push a formal bailout request by Spain as more probable than possible."

Major European stock markets saw a quiet opening, with the FTSEurofirst 300 (.FTEU3) little changed at 1,084.58 points.

Banks (.SX7P), which have rallied more than 12 percent over the last nine days, were among the top fallers, however, as more scandal hit the sector after the New York State Department threatened to strip Standard Chartered (STAN.L) of its state banking license due to alleged Iranian dealings in contravention of U.S. sanctions.

Alongside the euro zone's woes, investors are also focusing on how key developed and emerging economies are holding up.

Germany, which is now showing signs of wear from the debt crisis, reports factory data on Tuesday, while preliminary figures from Italy will reveal how badly its economy fared in the second quarter.

Later in the week U.S. mortgage data on Wednesday and Chinese industrial production, retail sales and inflation data on Thursday could also help determine the market's near-term direction.

The euro was broadly flat at $1.24 at 03.30 a.m. EDT.

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Dollar Falls Versus Most Major Peers After U.S. Payrolls Swell

The dollar fell against most major counterparts after U.S. employers added more jobs than forecast in July even as the unemployment rate rose to a five-month high.

The dollar weakened as stocks gained amid continued speculation the Federal Reserve will start a third round of asset purchases to spur the economy. The euro rose versus most major peers after members of German Chancellor Angela Merkel’s coalition signaled they won’t stand in the way of European Central Bank President Mario Draghi’s plan to buy government bonds to help stem fiscal turmoil. South Africa’s rand climbed.

“The headline reading was good, but the supporting details not so good, so we have a little support for risk sentiment but not a game changer,” said Greg Anderson, North American head of G-10 currency strategy at Citigroup Inc. in New York. “The door is left open to easing, and now on the horizon it’s back to what will Europe do about Spain, Italy and Greece.”

The dollar dropped 1.2 percent to $1.2324 per euro at 9:51 a.m. New York time. The U.S. currency appreciated 0.5 percent to 78.63 yen.

Payrolls added 163,000 jobs following a revised 64,000 rise in June that was less than initially reported, Labor Department figures showed today in Washington. The median estimate of 89 economists surveyed by Bloomberg News called for a gain of 100,000. Unemployment rose to 8.3 percent, from 8.2 percent.

‘Neutral Number’

The Dollar Index, which International Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, fell 0.8 percent.

“The number is not strong enough for investors to change their mind on quantitative easing,” said Eric Viloria, senior currency strategist at Gain Capital Group LLC in New York. “Right now, it’s just still on the table, and this is a neutral number.”

The Fed said Aug. 1 after a policy meeting it “will provide additional accommodation as needed” to spur growth and employment, while it refrained from expanding monetary easing this month. The central bank bought $2.3 trillion of assets in two rounds of the stimulus strategy called quantitative easing between December 2008 and June 2011.

South Africa’s rand was the biggest winner against the dollar, climbing 2.1 percent to 8.1747.

The Standard & Poor’s 500 Index advanced 1.6 percent, while Treasuries fell, pushing the yield on the 10-year note up six basis points, or 0.06 percentage point, to 1.54 percent.

The euro slid yesterday as stocks and commodities fell after the ECB’s Draghi failed to reassure investors that policy makers were ready to take immediate steps to curb the region’s debt crisis.

ECB officials are working on a plan to buy bonds and details will be released in coming weeks, Draghi told reporters yesterday after a policy meeting. The bank kept its key interest rate at a record low 0.75 percent.

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Bank of Canada to set rate moves, quarterly reports on same day

Starting in 2013, the Bank of Canada will publish its quarterly Monetary Policy Report (MPR) on the same day as its interest rate decisions, not the day afterwards as at present, the central bank announced on Friday.

It reconfirmed the schedule for the remainder of 2012, with the October MPR to be released on Oct. 24, a day after the Oct. 23 rate decision. And it noted that it retained, as always, the option of making unscheduled rate announcements at any time in the event of extraordinary circumstances.

One logistical question will be the time that decisions and reports are released. Currently, it issues the rate decisions at 9 a.m. Eastern time, and the MPRs at 10:30 a.m. The bank said that from 2013 on, it would have one single, consistent release time for all scheduled announcements and MPRs, to be determined after consultations.

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FOREX-Dollar, euro rise vs yen as jobs data boosts risk

* U.S. economy adds 163,000 jobs last month, topping forecasts

* Market players reassess ECB stance on bond-buying

By Wanfeng Zhou

NEW YORK, Aug 3 (Reuters) - The U.S. dollar rose to a two-week high against the yen and the euro rallied on Friday after a report showing the U.S. economy added the most jobs in five months in July boosted investor appetite for risk.

The safe-haven Japanese currency fell sharply across the board, losing more than 1 percent against the euro, Australian, Canadian and New Zealand dollars.

Non-farm payrolls rose 163,000 last month, the Labor Department said, beating economists expectations for a 100,000 gain.

Analysts said the data could dampen expectations for a third round of quantitative easing by the Federal Reserve next month, but the increase in the unemployment rate to 8.3 percent will probably keep expectations of additional monetary stimulus intact.

"Overall, the greater than expected increase in payrolls should win the day, and act as some support to risk assets even if it does diminish the chances of QE3 as early as September," said Andrew Grantham, economist at CIBC World Markets in Toronto.

The dollar rose as high as 78.77 yen, the strongest level since July 20. It was last up 0.6 percent at 78.70 yen.

The euro rose 0.8 percent to $1.2277 and rallied 1.4 percent to 96.61 yen.

The euro zone common currency also gained as investors took a more optimistic view of the European Central Bank's stance on sovereign bond buying.

The ECB said on Thursday it will draw up plans in the coming weeks to make outright purchases to stabilize euro zone borrowing costs, disappointing hopes for quick action to address the debt crisis.

"There are a lot of people out there taking a reassessment of what Draghi said yesterday," said Lutz Karpowitz, currency strategist at Commerzbank. "It's rather difficult to believe they will really refrain from stepping into the market."

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Euro climbs to session high vs dollar after ISM

The euro extended gains versus the dollar to hit a session high on Friday after data showing the pace of growth in the vast U.S. services sector edged up in July boosted risk appetite.

The euro rose as high as $1.2331 after the data, and was last at $1.2313, up 1.1 percent on the day.

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