* Euro eyes 5-month high of $1.3684
* Dollar index edges lower, eyes latest 8-month low
* Aussie dollar buoyed after China PMI at 53.8
By Charlotte Cooper
TOKYO, Oct 1 (Reuters) - The euro edged up towards a
five-month high on the U.S. dollar on Friday and the Australian
dollar gained after upbeat Chinese data encouraged a little
risk-taking in the higher-yielding currency ahead of U.S.
indicators.
The dollar dipped 0.1 percent to 83.47 yen <JPY=>, but stayed
above the previous day's low at 83.16 yen and last month's
15-year trough below 83.00 that had prompted Japanese authorities
to intervene for the first time in six years.
Chinese manufacturing gathered momentum last month, with the
official purchasing managers' index rising to 53.8 from 51.7 in
August, beating forecasts and providing further evidence the
economy is pulling smoothly out of a second-quarter swoon.
Traders said the data provided a sharp contrast to the
situation in the United States, with the market speculating the
Federal Reserve will take more quantitative easing steps even
though economic numbers the previous day injected a little
caution into that expectation.
"It's a perfect storm for risk and Asian currencies to
perform well. The U.S. is struggling with low inflation and high
unemployment so there's a lot of focus on QE2 which should drive
the dollar down further," said Gerrard Katz, head of FX trading
for Hong Kong at Standard Chartered.
"And you have reasonable growth elsewhere ... Asia, as with
that China PMI number, is performing strongly."
The euro rose 0.2 percent to $1.3663 <EUR=> after hitting a
five-month peak of $1.3684 on Thursday helped by data showing
euro zone banks are relying less on funds from the European
Central Bank.
The euro has rallied 15 percent against the dollar since
hitting a low in June. It has pushed up through its 55- and
100-week moving averages this week but not yet taken out
resistance at its April high of $1.3692.
The dollar index <=USD> eased 0.1 percent to 78.627 after
dropping as far as 78.414 on Thursday, its weakest in eight
months.
The Australian dollar rose 0.1 percent to $0.9668 <AUD=D4>,
after hitting a two-year high of $0.9734 on Thursday. Higher
interest rates and demand for Australia's resources, especially
from China, have fuelled its rally.
EYES ON JAPAN'S STANCE
Data on Thursday showed new U.S. jobless claims fell last
week and regional manufacturing grew faster than expected.
Analysts and traders say the market will be watching U.S.
indicators closely to gauge whether the Fed will act.
"If we see some good U.S. data it would not be a surprise to
see market speculation about the possibility of the Fed embarking
on quantitative easing in November fade a bit," said Minoru
Shioiri, chief manager of FX trading at Mitsubishi UFJ Morgan
Stanley Securities.
The dollar could get a lift against the euro on position
unwinding if that happens, Shioiri said.
The dollar was supported against the yen by market
nervousness that Japanese authorities might intervene.
Traders and analysts say one potential trigger point could be
a drop to the 82.87 yen 15-year low.
Japanese Finance Minister Yoshihiko Noda said on Friday he
would continue to take decisive steps on currency moves when
necessary. []
Despite such rhetoric, some traders said they had doubts
about how willing Japanese authorities were to intervene.
"I think the recent intervention was intended to buy time
before (Japan's half-year end) the end of September," said a
trader for a major Japanese bank.
Japan's recent feud with China has underscored the importance
of U.S.-Japan ties, and such diplomatic considerations may prompt
Japan to be cautious about intervention, the trader said.
"With the half-year end behind us and the United States
becoming more politically important for Japan, you have to wonder
how much action they can take that may meet U.S. opposition,
especially with a G20 meeting coming up," he said.
Data late on Thursday showed Japanese authorities spent 2.12
trillion yen, or $25.4 billion, on currency intervention in the
month to Sept. 28. []
This was roughly in line with market estimates of 2 trillion
for Sept. 15 alone, the only confirmed instance of Japanese
currency intervention during that period.
(Additional reporting by Reuters FX analyst Krishna Kumar in
Sydney and Masayuki Kitano in Tokyo; Editing by Joseph Radford)
