Dollar resilient after Fed largess, China data eyed
SYDNEY (Reuters) - The dollar held off a one-month low against a basket of major currencies on Thursday, no worse for wear even after the Federal Reserve delivered another dash of monetary stimulus and said it was ready to do more if necessary.
What prevented dollar bears from rampaging was the fact the Fed stopped short of launching a more aggressive programme of buying bonds outright, or QE3, which some in the market had expected, traders said.
In Asia, all eyes will be on HSBC's latest reading on China's manufacturing sector due at 03:30 a.m. British time. Any disappointment there could see risk aversion quickly return.
The dollar index was down a touch at 81.463, following a wild session that saw it first spike up to 81.740 in immediate reaction to the outcome of the Fed meeting, before quickly falling back to 81.228. It had hit a one-month low of 81.186 on Tuesday.
Still, analysts said the outlook for the dollar remained clouded with more market players likely to position for fresh stimulus from the Fed following the central bank's move to downgrade its growth forecast.
"We expect more monetary easing down the road," Rabobank's senior U.S. strategist Philip Marey wrote in a client note. "The unemployment rate is still far above its target and expected to remain above target at least until 2014. What's more, the recovery remains fragile and uneven."
The prospects of more stimulus, eventually, from the Fed helped underpin the euro and commodity currencies.
The euro last stood at $1.2685 (0.807 pence), having risen to a high of $1.2744 on Wednesday, near a one-month peak of $1.2748 set on Monday. Commodity currencies also held their ground with the Australian dollar at $1.0198, not far off a seven-week high of $1.0225 set overnight.
Spurred by surprisingly strong economic growth numbers, the New Zealand currency jumped above $0.8000 for the first time since early May. New Zealand's economy grew 1.1 percent in the March quarter, more than double what economists had expected.
The U.S. dollar managed to outperform a broadly softer yen after U.S. Treasury yields edged up. It fetched 79.490, having risen as high as 79.708 overnight.
Helping soothed nerves about Europe, a conservative-led government took power in Greece on Wednesday and promised to negotiate softer terms on its harsh international bailout.
As well, Italy put forward a proposal for the euro zone's rescue funds to start buying the debt of distressed European countries. The proposal is expected to be discussed at a meeting of European leaders on Friday, but would require a huge shift in Germany's stance for it to gain credence.
(Editing by Wayne Cole)
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