* Aussie sheds gains on investor profit-taking
* Japanese retail demand seen supporting cross/yen
* BOJ tankan survey shows Japanese firms less pessimistic
By Rika Otsuka
TOKYO, Oct 1 (Reuters) - The dollar was on the defensive on
Thursday, having resumed its downtrend in the previous session as
investors shifted funds out of the greenback and chased
growth-linked currencies.
The Australian dollar <AUD=D4>, seen as a proxy to global
growth in the currency market, remained the star performer. The
Aussie hit a 14-month high against the U.S. currency above
$0.8850, although dealers said it later erased those gains on
investor profit-taking.
But the overall market was rangebound as major economic
events lined up this week, dealers said.
"Market participants refrained from taking positions on one
direction before key U.S. jobs data, the G7 meeting and also as
the new quarter has just started," said Yuji Saito, head of the
FX sales department at Societe Generale.
"The broad market trend is for dollar selling but some dollar
short-covering is being seen before those economic events," he
said.
The Group of Seven finance ministers and central bank
governors will meet on Saturday on the sidelines of World Bank
and International Monetary Fund meetings in Istanbul to discuss
recent financial market developments and signs of recovery in the
global economy. []
Dealers said comments or news related to the dollar from the
meeting could be a trigger for investors to cover short positions
accumulated recently.
The Aussie has been helped by Australia's increasing business
ties with China.
"The Australian dollar is enjoying its status as a big
beneficiary of the solid Chinese economy," aid Hideki Amikura,
deputy general manager of the forex section at Nomura Trust Bank.
"The Aussie could extend its rally to $0.9 as there are no
negative factors preventing investors from buying at the moment."
Data showed on Thursday China's official purchasing managers'
index (PMI) rose to 54.3 from 54.0 in August as a pick-up in new
orders boosted both output and jobs. []
The dollar edged up 0.3 percent from late U.S. trade to 89.94
yen <JPY=>, staying above an eight-month trough of 88.23 yen hit
earlier this week on trading platform EBS. But offers from some
Japanese exporters limited gains in the dollar, traders said.
The U.S. currency lost nearly 7 percent against the yen in
the previous quarter just ended on Wednesday as investors dumped
the dollar on a fall in U.S. Treasury yields. But against the
closing level at the end of 2008, dollar/yen was down only 1
percent.
The euro <EUR=> inched down 0.1 percent to $1.4621 after it
gained more than 4 percent in July-September.
Against the Japanese currency, the euro edged up 0.1 percent
to 131.49 yen <EURJPY=R>.
Traders said Japanese retail investors are expected to stay
buyers of foreign currencies in the fourth quarter, though
momentum could slow if Tokyo's Nikkei share average <>
slides further below the key psychological 10,000 level.
The Nikkei was down 1.4 percent at around 9,987 in afternoon
trade.
The Australian dollar hit a 14-month high of $0.8860 but
quickly erased its gains to slide to $0.8802, down 0.4 percent on
the day, as some players booked profits.
The Aussie has seen a brisk rise, buoyed by higher commodity
prices and expectations that domestic interest rates will rise
faster than other developed economies.
The Swiss franc, meanwhile, remained on the backfoot against
the euro <EURCHF=>, having dropped the previous day on
speculation the Swiss National Bank may have intervened to weaken
its currency.
The market showed muted reaction after the Bank of Japan's
closely watched quarterly tankan survey showed on Thursday
Japanese business morale improved further as the economy picks up
from its worst slump in decades, though it was still negative.
The headline index for big manufacturers' sentiment improved
to minus 33 in September from minus 48 three month ago after
having hit a record low of minus 58 in the March survey.
[]
The big data piece in the United States is the ISM index and
at 52.9 currently the index is at is highest since June 2007 and
is forecast to rise to 54.0. The data is due at 1400 GMT.
Weekly jobless claims are also due along with some income and
spending data for August.
(Additional reporting by Anirban Nag in Sydney, Kaori Kaneko in
Tokyo; Editing by Joseph Radford)
