By Naomi Tajitsu
TOKYO, Feb 19 (Reuters) - The dollar slipped on Tuesday as
growing expectations of a rise in Australian interest rates
boosted high-yielding currencies, while the yen rallied on
chatter that China may also lift rates.
The Australian dollar hit a three-month high versus the U.S.
currency after minutes from a policy meeting of the Reserve Bank
of Australia fueled speculation that the central bank may keep
lifting rates after a 25 basis point increase earlier this month.
That helped spur demand for carry trades, in which investors
borrow the low-yielding yen to fund purchases of higher-yielding
currencies and assets, and helped push the New Zealand dollar to
a seven-month peak against the U.S. dollar.
The yen received a jolt of buying late in the session as the
Chinese yuan hit a post-revaluation high after domestic inflation
climbed to an 11-year peak, prompting talk that the People's Bank
of China may soon lift interest rates.
"Talk about China is pushing the yen higher," said Hiroshi
Yoshida, a trader at Shinkin Central Bank."
The yen is sometimes considered a proxy currency for the
illiquid yuan, although the two rarely move in tandem.
The dollar <JPY=> fell roughly 0.3 percent to 107.75 yen on
electronic trading platform EBS, pulling further away from a
one-month high of 108.62 yen hit last week.
The euro <EUR=> jumped roughly the same amount to $1.4716,
its highest in two weeks. Against the yen, the single European
currency <EURJPY=R> was little changed at 158.65 yen, recovering
from a slide to 158.27 yen.
The Australian dollar <AUD=D4> was up 0.7 percent, hovering
near $0.9209 touched against the dollar for the first time since
early November.
The Aussie shot up after RBA minutes released early on
Tuesday showed that the central bank debated a hefty 50 basis
point interest rate hike at its meeting earlier this month when
it delivered a 25 basis point increase. []
The RBA left the door open for more rate rises from the
current 11-year high of 7 percent to cool the country's inflation
pressures, with the market expecting another hike next month.
The New Zealand dollar <NZD=D4> traded 0.3 percent higher at
$0.7970, after climbing to $0.7987 on the view that interest
rates in the country will hold at 8.25 percent for now.
The Aussie <AUDJPY=R> and kiwi <NZDJPY=R> both struck
two-month highs against the yen, as a 0.9 percent gain in the
Nikkei share average <> and broad gains in Asian shares
stirred risk appetite, prompting some investors to sell the
low-yielding Japanese currency for high yielders.
U.S. DATA AWAITED
Weakness in the dollar helped to boost the euro, which edged
up after sliding earlier in the month on expectations the
European Central Bank will lower interest rates this year.
The euro has bounced back against major currencies after ECB
officials cooled speculation of looser policy this year, but
lingering expectations for a rate cut have kept the single
currency below its record high of $1.4968 hit late last year.
In contrast, the Federal Reserve has slashed benchmark
interest rates since September to 3 percent from 5.25 percent,
with investors expecting another rate cut next month as the U.S.
economy continues to show signs of weakness.
The NAGH/Wells Fargo Housing Market index due at 1800 GMT is
expected to be unchanged from January, suggesting that sentiment
has not improved after sliding to near a record low last month.
A weak reading in the survey, along with figures on U.S.
housing starts later in the week, would bolster the view that the
housing sector is continuing to suffer while raising the prospect
of a recession, which could push the dollar lower, analysts said.
"This week's housing data probably won't be very good, but
traders are waiting to see if it comes in significantly worse
than expected," said Kimihiko Tomita, vice president of foreign
exchange at State Street in Tokyo.
(Additional reporting by Chikako Mogi; Editing by Hugh Lawson)
