By Masayuki Kitano
TOKYO, May 29 (Reuters) - The dollar rose against the yen on
Thursday, clawing back towards a two-week high hit the previous
day after better-than-expected durable goods orders eased
concerns about the outlook for the U.S. economy.
The dollar also gained versus the euro after data on
Wednesday showed that durable goods orders fell by less than
expected in April, while orders excluding transport equipment
rose 2.5 percent for their biggest gain since July.
[]
The data underscored market expectations for the Federal
Reserve to keep interest rates on hold for now and to raise them
by 0.25 percentage point to 2.25 percent by the year-end. That
gave U.S. bond yields a boost as well as the dollar. <FEDWATCH>
The U.S. currency drew some support after Dallas Fed
President Richard Fisher said late Wednesday that the U.S.
central bank would likely increase interest rates "sooner rather
than later" if inflation worsens, even if the economy remains
weak. []
Such economic data by itself, however, is unlikely to enable
the dollar to break above its recent range against the yen,
traders said, adding that the dollar could come under pressure if
oil prices rise.
"Oil prices are still the factor that can whip the market
around," said Akira Kato, a senior manager for Bank of
Tokyo-Mitsubishi UFJ's foreign exchange trading department.
"As long as oil prices stay high, dollar selling pressure
will remain strong," he said.
The dollar rose 0.2 percent to 104.94 yen <JPY=>, edging back
towards a two-week high of 105.32 yen hit on electronic trading
platform EBS on Wednesday.
Traders said the dollar was unlikely to immediately rise
105.70 yen, which would be a three-month high. Dollar selling
interest was likely to be strong at levels above 105 yen
including possible offers from Japanese exporters, they said.
The euro fell 0.2 percent to $1.5611 <EUR=>.
Moves in oil prices are seen as key for the dollar, as
surging oil prices have fanned fears about the ability of U.S.
consumers and businesses to weather the credit- and housing
market-led downturn.
The dollar has gained some reprieve this week as oil prices
have retreated from a record high of $135.09 a barrel <CLc1> hit
last week. U.S. crude oil futures edged down to below $131 on
Thursday.
The dollar has tended to fall when oil prices surge due to
speculation that oil-producing countries may use the increased
dollar-denominated windfall from crude exports to buy euros and
other currencies to diversify their portfolios.
Morgan Stanley said in a research note that at current
prices, oil export receipts enjoyed by all oil net exporters
total around $200 billion a month.
EQUITIES RISE, YEN SLIPS
The yen fell broadly as Japan's benchmark Nikkei share
average <> soared more than 3 percent, pointing to an
increase in investors' risk appetite and a rise in demand for
carry trades.
Share prices are considered a barometer of risk appetite, and
a rise in equities can boost demand for carry trades, in which
low-yielding currencies like the yen are sold to invest in
higher-yielding currencies and assets.
The euro rose 0.1 percent to 163.80 yen <EURJPY=R>, edging
towards a one-month high of 164.48 yen hit on Wednesday.
The Australian dollar rose as far as 101.01 yen <AUDJPY=R>,
its highest level since November, before retreating to 100.70
yen, nearly flat on the day.
The Aussie fell to as low as $0.9592 <AUD=D4>, dented after
data showed that Australian business investment fell 2.5 percent
in the first quarter, surprising analysts who had expected a
solid rise. []
But the losses were limited and the high-yielding Australian
currency stayed in sight of a 25-year peak around $0.9655 hit
last week.
"The Australian dollar is one of the few currencies with
clear upward direction, drawing market players away from trading
on major currency pairs like dollar/yen," said a senior trade at
another big Japanese bank.
(Additional reporting by Satomi Noguchi, Editing by Michael
Watson)
