* Dollar index holds above support at 85.09, looks vulnerable
* Dollar hits 8-week low vs Swissie, near 5-week low vs yen
* Aussie firm on rising commodities
By Rika Otsuka
TOKYO, June 28 (Reuters) - The dollar was on the defensive on
Monday as investors sought to cut long positions built in favour
of the greenback, while the euro held gains as the focus shifted
to the sustainability of a U.S. recovery from the euro zone debt
woes.
The dollar index barely moved at 85.31 <.DXY>, holding above
last week's low of 85.09 which is seen as near-term support. A
fall below 85.09 would take the index to its weakest since
mid-May.
A sustained move below 85 would see more losses, with initial
support expected near the 55-day moving average at 84.80.
The U.S. currency hit an eight-week low against the Swiss
franc and hovered near a five-week trough versus the yen after
data released on Friday showed U.S. gross domestic product in the
first quarter grew more slowly than expected. []
"While mixed data shows a U.S. rate hike is not on the
horizon, the market favours the safe-haven yen, the Swiss franc
with its central bank having stopped FX intervention and sterling
with expectations for higher interest rates," said Mitsuru
Sahara, chief manager of FX derivatives trading at Bank of
Tokyo-Mitsubishi UFJ.
The dollar rose 0.3 percent to 89.43 yen <JPY=> but was still
not far from a five-week low of 89.21 hit on Friday. It lost 1.3
percent last week, the third straight week of declines.
It got some support in Asia from expectations that Japanese
importers' bids were sitting below 89.00 yen, but once trade
shifts to Europe and the U.S., there was some expectation the
market might try to hit options triggers below 89.00 yen.
The latest data from the Commodity Futures Trading Commission
showed currency speculators trimmed bets on the greenback and
went long on the yen in the week to June 22. []
Sterling, which hit its highest against the dollar since
early May on Friday and gained nearly 1 percent, edged down 0.1
percent to $1.5050 <GBP=D4>.
Against the Swiss franc, the U.S. currency slipped 0.1
percent to 1.0928 francs after falling as low as 1.0895, its
weakest since May 4.
Reuters FX analyst Krishna Kumar said the 1.0890-98 area was
a pivotal range after being major resistance to the dollar's
advance in February and March.
Market players feel comfortable about picking up the Swiss
franc as the Swiss National Bank backed off a pledge to fight
excessive appreciation of the franc earlier this month.
The U.S. GDP numbers came after some weaker-than-expected
housing numbers and a dovish Federal Reserve, all of which drove
U.S. Treasury yields lower and prompted investors to reassess
their dollar positions and the prospect of the Fed potentially
holding rates lower for longer than many expected.
"I have a feeling in my bones that perhaps Friday was the
start of the market questioning the viability of the U.S. dollar
as the safe haven," said Tom Lovell, an economist at ICAP in
Sydney.
The euro <EUR=> inched up 0.1 percent to $1.2381, having
gained nearly 0.5 percent on Friday. And while the dollar's drop
was helping the euro, funding issues in the euro zone were seen
likely to cap gains.
Near-term resistance is at $1.2490, the high struck on June
21, with support forming around $1.2254, Friday's low.
Against the yen, the euro <EURJPY=R> rose 0.3 percent to
110.68 yen.
Traders said the impact from the weekend G20 meeting on the
currency market was muted, with the summit throwing up no major
surprises for investors. []
G20 leaders agreed to take different paths to cut budget
deficits and make their banking systems safer, serving a timely
reminder to investors that the global recovery would be uneven
and bumpy.
Still, high-yielding currencies were supported by improved
risk appetite as commodities <.CRB> and stocks <.SPX> made gains.
The Australian dollar <AUD=D4> rose 0.1 percent to $0.8750,
having gained nearly 1 percent on Friday. Traders said there was
talk of stops lined up above $0.8780 with resistance at $0.8788,
the 55-day moving average.
(Additional reporting by Anirban Nag and Reuters FX analyst
Krishna Kumar in Sydney and Satomi Noguchi in Tokyo, editing by
Chris Gallagher)
