* Dollar still under pressure, just off lows
* But trading seen subdued with holidays in UK, Japan
* Month-end flows seen tilted toward dollar selling
By Jessica Mortimer
LONDON, April 29 (Reuters) - The dollar held near a
three-year low against a basket of currencies on Friday and was
on track for its biggest weekly fall since mid-January, with
more losses possible due to month-end demand to sell dollars.
The dollar index <.DXY> was down 0.1 percent, keeping the
euro near the previous day's 17-month high and on track to vault
$1.50, while the Australian dollar hovered close to its 29-year
peak against the greenback.
The dollar was sold heavily after the Federal Reserve made
clear to markets on Wednesday it was in no hurry to change its
ultra-loose monetary policy, although traders said volumes were
thin due to holidays in the UK and Japan and could limit moves.
"The dollar remains under pressure, but it has been a very
fast move and it can be difficult to extend a move like that,"
said Carl Hammer, currency strategist at SEB in Stockholm.
"If the euro can break above a crucial level around $1.5140
then the pattern is constructive for a substantial move higher".
The euro was expected to meet resistance ahead of a reported
options barrier at $1.4900, while the Aussie was likely to need
strong momentum to lift it through large barriers at $1.10.
The dollar index, which tracks its performance against a
basket of major currencies, was down 0.1 percent at 73.052,
having plumbed a three-year low of 72.871 on Thursday.
It is down around 1.4 percent this week, on course for its
biggest drop since a 2.5 percent fall in the week to Jan. 16.
The euro edged up 0.1 percent to $1.4840 <EUR=>, off a
17-month peak of $1.4882 hit on Thursday on trading platform
EBS. The first resistance was expected at $1.4906, a peak from
Dec. 7 2009, ahead of a substantial barrier at $1.5000.
Beyond $1.5000, the key target was the 2009 high of $1.5145.
Flash estimates of euro zone inflation for April due at 0900
GMT could support the euro. They are expected to show inflation
remaining elevated at 2.7 percent year-on-year, adding weight to
expectations of further euro zone interest rate hikes.
The Australian dollar <AUD=D4> was steady at $1.0922, still
within easy reach of a 29-year peak of $1.0948. Option barriers
around $1.10 could cap the currency for now.
MONTH-END FLOWS
Analysts and traders said the dollar could face selling
pressure during the day, as investors tweak their portfolios at
the end of the month, with flows biased towards dollar selling.
Compared with the steep falls against other currencies, the
dollar has held up reasonably well versus the yen in the past
few sessions. It last traded at 81.57 yen <JPY=>, steady on the
day and near a one-month low of 81.27 yen hit earlier this week.
"The signal to sell the USD against JPY is particularly
strong, as Japanese equities continued to underperform their
global counterparts," analysts at Citi said in a research note,
referring to their FX hedge rebalancing model.
Month-end portfolio rebalancing can spur buying of
currencies that saw their asset markets underperform against
global peers during the month, and vice versa.
Japanese shares have slid since last month's tsunami and
earthquake. MSCI's index of Japanese equities is down 1.7
percent in April <.MIWD00000PUS>, lagging well behind a 3.5
percent rally in MSCI's index of global shares.
A trader for a major Japanese bank in Singapore said the yen
may eventually come back under pressure against the dollar once
market players start re-focusing on weakness in Japan's economy
and the extent of the damage caused by the earthquake.
Trading was subdued with Japanese financial markets shut for
a public holiday and UK markets closed for a royal wedding.
(Additional reporting by Ian Chua in Sydney and Asia Forex
team)
