* Euro at 5-month high vs dollar, resistance near $1.4280
* ECB rate-hike expectations may be fully priced
* Fed Chairman Ben Bernanke to speak
(Updates prices, adds details)
By Wanfeng Zhou
NEW YORK, April 4 (Reuters) - The euro hovered near a
five-month peak against the dollar and an 11-month high against
the yen on Monday, with near-term strength seen limited as an
expected euro zone interest rate rise was mostly priced in.
The European Central Bank, at its policy meeting on
Thursday, is widely expected to raise rates by 25 basis points
from a record low to battle rising inflationary pressures in
the euro zone. Two more 25-basis-point rate hikes are factored
in by year-end. <ECBWATCH>
Traders expect the euro to stay near current levels in the
coming days, with resistance seen around $1.4281, the November
high. The single currency could struggle to extend gains unless
ECB President Jean-Claude Trichet sounds a surprisingly hawkish
tone on inflation, analysts said.
"Market participants will likely remain reluctant to push
too hard on the short side of the euro ahead of the European
Central Bank rate decision," said Dan Cook, chief executive of
IG Markets in Chicago.
"Once the unknown becomes known, the question becomes 'How
long can 25 basis points remain supportive or do we face a
situation of a quick relief rally that is followed by a rapid
sell-off as market focus returns to sovereign debt?'" he said.
The euro <EUR=> last traded at $1.4217, down 0.1 percent.
Bids from Asian central banks and other investors are likely to
offer the euro solid support at $1.4190, with traders citing
stops through to below $1.4150.
Traders also noted trendline resistance drawn from the
euro's record high set in July 2008 coming in around $1.4300.
Investors were in a wait-and-see stance, with a number of
central bank rate decisions in the developed world and a slew
of speakers from the U.S. Federal Reserve later in the week.
The euro rose above 120 yen <EURJPY=> for the first time
since May 2010 and was last at 119.47, down 0.1 percent.
The dollar was flat at 84.03 yen <JPY=>. It hit its highest
level since September on Friday on trading platform EBS,
stalling ahead of an option barrier at 84.75.
The pair rose above its 200-day moving average last week,
signaling the downtrend may have run its course.
Dollar/yen's "inability to close above the December 2010
high on Friday at 84.51 and the failure to get above that level
today are leading to profit-taking and modest selling for the
pair," said Greg Michalowski, chief currency analyst at FXDD.
"The market is also concerned that perhaps the Fed may not
be so quick to change their policy course toward less
accommodation."
Fed Chairman Ben Bernanke was scheduled to speak later on
Monday. Recent Fed official comments have highlighted
divergence and uncertainty over the outlook for U.S. monetary
policy.
Atlanta Fed President Dennis Lockhart said on Monday that
while U.S. inflation is likely to remain low for now,
policymakers will keep a close eye on potentially
self-fulfilling consumer expectations of higher prices.
The yen hovered near recent lows against higher-yielding
currencies such as the Australian dollar. Expectations of low
Japanese rates have encouraged investors to borrow in yen and
reinvest in higher-yielding assets in the so-called carry
trades.
The Bank of Japan is likely to downgrade its economic
assessment and keep policy ultra-loose on Wednesday.
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For carry trade graphic: http://link.reuters.com/xed88r
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The Australian dollar traded at its highest since being
freely floated in 1983 <AUD=D4>. It slipped back to trade at
1.0361, down 0.3 percent on the day.
(Additional reporting by Nick Olivari; Editing by Dan
Grebler)
