* Euro gains as Asian central banks shed dollars
* Euro hits 6-month high of $1.3763 <EUR=>
* Dollar index hits 8-month low <.DXY>
* U.S. ISM watched for hints on more QE
(Releads, adds quotes, updates prices)
By Tamawa Desai
LONDON, Oct 1 (Reuters) - The euro rose broadly on Friday,
hitting a six-month high against the dollar as Asian central
banks were seen selling the U.S. currency for euros to rebalance
their books and helped by technical triggers.
Market players said Asian central banks bought dollars
versus local currencies in Asian hours, and subsequently were
seen selling the greenback to rebalance their reserve portfolios
by buying euros.
The euro extended gains after breaking above an option
barrier at $1.3700 as speculative players bought into the pair,
with talk of a digital option at $1.3750 set to expire at the
New York cut at 1400 GMT pushing it to $1.3763, its highest
since mid-March.
By 1136 GMT, the euro <EUR=> was up 0.7 percent at $1.3725.
The euro is poised to close above its 55- and 100-week moving
averages at $1.3612 and $1.3572 respectively and technical
analysts said this would open the way to more gains.
The euro zone manufacturing purchasing managers' index (PMI)
for September dropped to 53.7 from 55.1 in August, slightly
above an earlier flash reading of 53.6. [] Euro
zone unemployment was also stubbornly high at 10.1 percent in
September. []
"PMI results across the euro zone were mixed, and pointed to
a divergence in growth prospects," said Geoffrey Yu, currency
strategist at UBS, adding the results were not surprising and
market reaction was subdued.
The euro also touched a four-month high against sterling
<EURGBP=D4> and hit a two-month peak against the yen at 114.50
yen <EURJPY=R>.
Upbeat Chinese PMI data earlier helped boost demand for
riskier assets and pushed the Australian dollar to match a
two-year high versus the U.S. unit of $0.9734 <AUD=D4>.
U.S. DATA EYED
Losses against the euro helped push the dollar down 0.6
percent against a currency basket, driving the dollar index
<.DXY> to 78.147, its lowest since January. The index fell more
than 5 percent in September, its worst monthly performance since
May 2009.
Market players will look to a key U.S. manufacturing index
due at 1400 GMT to gauge whether more monetary easing is in
store. The Institute for Supply Management (ISM) index is
forecast in a Reuters poll to come in at 54.5.
"The market is nervous about the ISM because investors know
that it could be worse than expectations," said Lutz Karpowitz,
currency analyst at Commerzbank in Frankfurt.
"More QE could be in store if U.S. data in the coming weeks
don't surprise on the upside."
On the other hand, a strong reading could slightly weaken
the case for more asset-buying by the U.S. Federal Reserve.
"It will be key how Treasury yields react to the data
releases, as higher yields could provide some respite for the
dollar," said UBS's Yu.
The dollar slipped 0.3 percent against the yen to 83.21 yen
<JPY=>, hovering near a 15-year low of 82.87 yen hit last month
which prompted Japan to sell the yen, but investors remained
wary of more intervention.
Japanese Finance Minister Yoshihiko Noda said on Friday he
would continue to take decisive steps on currency moves when
necessary. []
(Additional reporting by Naomi Tajitsu)
