* Aussie reverses losses, RBA less dovish than expected
* Euro also turns positive, dollar, yen retreat
By Rika Otsuka
TOKYO, July 6 (Reuters) - The euro and Australian dollar
rebounded from early losses against the dollar and yen on Tuesday
after a statement by Australia's central bank helped dispel some
gloom about the economic outlook and led to short-covering.
The Reserve Bank of Australia (RBA) left its cash rate steady
at 4.5 percent as expected, saying the global economy had
continued to expand, albeit unevenly, with growth in Asia very
strong and signs of China moderating to a more sustainable rate.
[] []
The Aussie fell in thin trading ahead of the announcement as
some had expected it to sound a more dovish note, and on the
charts it formed a short-term double bottom at $0.8317 <AUD=D4>,
a drop which helped set it up technically for a rebound.
"There were concerns among dealers that the RBA would be very
bearish about the economy before the rate announcement. But the
central bank was not that dovish, prompting players to buy back
the Australian dollar, as well as the euro," Daisuke Karakama,
market economist at Mizuho Corporate Bank.
"But there were no new factors out. The only thing we can say
is that the euro and the Aussie are in a rebound phase."
The Aussie stood 0.4 percent up on the day at $0.8437
<AUD=D4> after earlier dropping to test support at $0.8315, a low
set last week.
Against the yen it climbed 0.6 percent on the day at 74.08
yen <AUDJPY=R> after sliding as far as 72.73 yen.
"The RBA is refusing to panic, as many in the market seem to
be," said Brian Redican, senior economist at Macquarie.
Some analysts said another rate hike in August could not be
ruled out but a rate cut, as some had started to talk about,
looked unlikely.
"Yes, global uncertainties are to the downside, so that
raises the bar for a hike. But the RBA is still sounding
confident and there's very little chance of a cut," Redican said.
Global risk appetite has taken a beating in the past few
weeks on growing worries about the health of the euro zone's
banking system, a slowdown in China and risks of a double-dip
recession in the United States.
The euro, which dipped to $1.2479 in early trade, pulled back
up to $1.2557 <EUR=>, heading back towards last week's six-week
high at $1.2613.
Against the yen it also turned positive at 110.28 yen
<EURJPY=R> after dipping as far as 109.14 early on.
The early losses came after Harvard University economist
Kenneth Rogoff, a former International Monetary Fund chief
economist and an expert on banking crisis, told Bloomberg
Television that China's property market is beginning a "collapse"
that would hit banks. []
The report fed into concerns about China's economy, while
speculative trades exaggerated yen gains in subdued activity as
the market awaited the return of U.S. players from a long
weekend.
U.S. markets were closed for the Independence day holiday on
Monday.
Data from Japan's finance ministry showed China expanded its
buying of Japanese government bonds in the first four months this
year, buying a net 541 billion yen of mostly short-term JGBs,
double a record amount logged in 2005, amid the euro zone debt
crisis. []
JGB market players said the buying was probably more about
parking funds short-term during the euro zone debt crisis than
long-term interest.
The dollar index, a gauge of the greenback's performance
against a basket of six major currencies, slid 0.2 percent to
84.427 <.DXY>. The index's near-term support is seen at 84.132, a
seven-week low hit last week.
The dollar was steady at 87.75 <JPY=> with the market
watching whether it could hold above 87.00 yen <JPY=> as options
triggers are believed to be set below that level, traders said.
The greenback hit a seven-month trough of 86.96 yen last week
on the back of growing worries about an economic slowdown in the
United States.
(Contribution by Reuters FX analyst Krishna Kumar; Editing by
Joseph Radford)
