By Satomi Noguchi
TOKYO, May 9 (Reuters) - The euro held firm against the
dollar on Friday after rebounding from a two-month low on reduced
expectations for European Central Bank rate cuts.
ECB President Jean-Claude Trichet said on Thursday that
inflation remained his top concern, suggesting the bank won't cut
interest rates any time soon. []
The euro had fallen to a two-month trough below $1.53 as some
investors expected Trichet to temper his tough talk on inflation
and focus on signs of slowing euro zone growth.
Still, the single currency could stay under pressure versus
the dollar as the market focus shifts to selling currencies with
a deteriorating growth outlook, traders said.
"Trichet stuck to inflation concerns but the markets are
looking ahead to worsening economic conditions in the euro zone,"
said Hideaki Inoue, chief manager of Mitsubishi UFJ Trust Bank.
"That puts a drag on the euro's rebound, and it will test
$1.52 next week when European financial institutions issue
earnings reports."
A trader at a Japanese bank said similar concerns were
hurting the New Zealand dollar despite its high-yielding status.
Growth worries also hit the Australian dollar after the
country's central bank said in its quarterly monetary policy
statement that a significant slowdown in demand would help curb
inflation pressures. []
Investors took the Reserve Bank of Australia's remarks as
reducing the chances of a near-term interest rate rise after it
kept rates unchanged earlier this week at 7.25 percent.
The euro edged up to $1.5414 <EUR=> from late U.S. trade on
Thursday as investors continued to cover short positions, traders
said.
It had fallen as low as $1.5285 on trading platform EBS the
previous day before the ECB kept benchmark interest rates
unchanged at 4 percent and Trichet told reporters high energy and
food costs meant the euro zone still faced a protracted period of
high inflation. []
The euro hit an all-time high against the dollar above $1.60
just two weeks ago.
The Australian dollar fell 0.4 percent to $0.9402 <AUD=D4>,
retreating from a two-week high above $0.95 hit this week.
JAPAN MARGIN TRADERS
The yen edged higher against the dollar after jumping the
previous day as investors reduced exposure to risk and and cut
carry trades, while Japan's Nikkei stock average and other Asian
stocks fell on Friday.
Market players said deepening concern about slowing global
growth, getting a pinch from a U.S. economic downturn, was
helping the low-yielding yen, which is typically used to finance
risky investments such as carry trades.
"Asian stock markets are weakening, particularly in China,
which has reduced risk appetite and prompted buybacks of the
yen," said Inoue.
But persistent fund outflows by Japanese margin traders
capped the yen's gains as data showed that they were huge buyers
of the New Zealand dollar even during its 2 percent slide against
the yen on Thursday.
The kiwi tumbled the previous day after a surprise fall in
first-quarter employment in the country stoked expectations that
rates in New Zealand were likely to ease later in the year.
Margin traders are known for buying higher-yielding
currencies on dips but sometimes getting burned when there is a
big unwind of carry trades.
The dollar edged down 0.2 percent to 103.50 yen <JPY=> while
the euro also slipped 0.2 percent to 159.45 yen <EURJPY=R>.
Against the yen, the Australian dollar was down 0.7 percent
to 97.27 yen <AUDJPY=R> and the kiwi slid 0.2 percent to 79.86
yen <NZDJPY=R>.
Sterling was little changed at $1.9553 after the Bank of
England kept interest rates on hold at 5 percent on Thursday.
(Additional reporting by Tetsushi Kajimoto; Editing by Hugh
Lawson)
