* Euro faces resistance around $1.4250, then $1.4280
* U.S. dollar index hits 15-month low, sterling rises
* Yen trading subdued, no intervention seen
(Updates prices, adds comment, details)
NEW YORK, March 22 (Reuters) - The euro eased back after
hitting a 4-1/2-month high against the dollar on Tuesday but
expectations of a euro zone interest rate hike next month could
limit any downside for the single currency.
Sterling climbed to a fresh 14-month high against the
dollar also on expectations of an interest rate hike in coming
months after stronger-than-expected UK inflation data.
The yen traded in a tight range, hovering around 81 per
dollar. In the near term, analysts said the 80 area could serve
as a floor as markets were wary of further intervention by the
Group of Seven nations to counter yen strength after Japan's
earthquake, tsunami and resulting nuclear crisis. For details,
see []
The euro climbed as high as $1.4249 <EUR=EBS> on trading
platform EBS, but gave up gains after running into
options-related barriers at about $1.4250. Further resistance
is seen around $1.4280, the November high.
With the European Central Bank widely expected to raise
interest rates next month, traders said the euro may make
another run at those levels. The currency also found support
after euro zone officials agreed Monday on the setup of a
permanent euro zone bailout fund.
"We continue to expect euro to test up to the November high
of 1.4282 as we believe that recent developments have all been
negative for the U.S. dollar and positive for the euro," said
Camilla Sutton, senior currency strategist at Scotia Capital in
Toronto.
The euro <EUR=EBS> last traded at 1.4210, down 0.2 percent
on the day. Technical analysts at Citigroup said they expect a
test of the $1.48-$1.51 area in the near term. The euro hit
around $1.5144 back in November 2009.
German two-year bond yields have risen about 30 basis
points over the past week to 1.75 percent, widening the gap
over U.S. Treasury yields to about 110 basis points.
The euro zone's permanent bailout fund, the European
Stability Mechanism, will be backed by paid-in and callable
capital and offer loans more cheaply than the temporary
facility does now, a euro zone source said. The comprehensive
package is to be approved by EU leaders on March 24-25.
YEN SUBDUED
The Group of Seven countries may have sold a total of
around 530 billion yen ($6.5 billion) last Friday as they
intervened in forex markets to weaken the Japanese currency,
data from the Bank of Japan showed on Tuesday. []
The amount is far smaller than market talk indicating they
could have sold around 2 trillion yen, though some analysts
said the figure was not a surprise.
"Our interpretation is that the signaling effect from
'coordinated intervention' did most of the job for the BoJ in
the short-run. Nevertheless, we judge that the BoJ is likely to
be ready for more persistent operations, should they be
needed," said Jens Nordvig, global head of G10 FX strategy at
Nomura in New York.
Ihab Salib, senior portfolio manager and head of
international fixed-income at Federated Investors in
Pittsburgh, said in the medium term, authorities may try to
drive the dollar/yen to levels around 85 and 86.
"I don't have a high degree of comfort that they'll be able
to change the longer-term trend of a stronger yen. But in the
short to medium term, I think they will succeed," Salib said.
Federated Investors manages about $350 billion in assets.
Salib oversees more than $3 billion.
Japan again warned it would act to keep the yen in check,
but traders saw no action in the FX market on Tuesday from
Japanese or other G7 authorities. That resolve could be tested
if dollar/yen looks like it will break back below 80 yen.
The dollar last traded at 80.94 yen <JPY=EBS>, down 0.1
percent on the day but still near the middle of the day's
narrow range of 80.85-81.29 yen on EBS.
Sterling added 0.4 percent at $1.6369 <GBP=D4> after
British inflation last month surged to a 28-month high of 4.4
percent, reviving speculation the Bank of England will not wait
much longer to raise interest rates. []
The dollar index <.DXY>, a measure of the greenback's value
against a basket of six major currencies, fell to 75.249 -- the
lowest since early December 2009.
(Reporting by Nick Olivari and Wanfeng Zhou, additional
reporting by Steven C. Johnson; editing by Diane Craft)
