* Safe-haven bids for dollar quickly rolled back
* Euro hits 12-week peak as ECB rate hike hopes help
* Yen near 4-week high, signs hint at break from range
By Hideyuki Sano
TOKYO, Feb 2 (Reuters) - The dollar marked its lowest level
in nearly three months on Wednesday as a string of robust
economic data and easing concerns over Egypt took the steam out
of safe-haven buying in the currency.
Strong manufacturing numbers from the United States and other
countries fuelled optimism on global economic growth, with
expectations of loose U.S. monetary policy further encouraging
risk-taking.
"When investors' risk appetite grows, the dollar becomes a
funding currency," said Junya Tanase, a strategist at J.P. Morgan
Chase Bank.
"If the unrest in Egypt doesn't worsen and global markets
remain stable, the dollar is likely to keep falling moderately,"
he said.
The dollar index <.DXY> <=USD> dipped to 76.931, its lowest
since early November, grappling with a 76.4 percent retracement
of its November rally around 77.00.
Data on Tuesday showed the U.S. manufacturing sector grew at
its fastest pace last month since 2004.
But unlike in 2004, when the Federal Reserve started pushing
up interest rates, the U.S. central bank is still committed to a
stimulative policy and a Fed official said another round of bond
purchases could be discussed at the Fed's next policy meeting in
mid-March if the recovery flags. []
The combination of strong growth prospects and an easy policy
outlook is encouraging investors to wade into risky trades.
That means more buying of the euro, which has been hurt by
concerns over some euro zone countries' debt financing, as well
as of growth-linked currencies such as the Australian dollar.
The euro <EUR=> climbed as high as $1.3862, its highest since
early November, as the common currency continued to benefit from
rising expectations that the European Central Bank will go well
ahead of its U.S. counterpart in raising rates.
Many traders expect European Central Bank Governor
Jean-Claude Trichet to give more warnings on inflation when he
holds a news conference on Thursday after data showed earlier
this week euro zone inflation rose more than expected.
"We could see profit-taking at some point but it's hard to
sell the euro before his news conference," said Yuuki Sakasai, a
forex strategist at Barclays Capital.
Trichet's news conference will be followed by Federal Reserve
Chairman Ben Bernanke's speech on the same day, which could
highlight the U.S. central bank's relative dovishness compared
with the ECB.
"I don't see any reason to think that the current
dollar-selling trend will change in the near term. The euro will
probably test $1.40," a trader at a Japanese bank said.
EGYPT CONCERNS EASE
Surprisingly strong euro zone manufacturing data, which some
market players took as a sign that growth in Germany was
trickling down to others in the bloc, also bolstered the
currency.
The Australian dollar maintained Tuesday's 1.5 percent gain
to trade at $1.0110 <AUD=D4>, with stronger commodity prices seen
paving the way for the currency to test resistance at $1.0152 and
$1.0183.
Concerns in financial markets that the Egyptian political
crisis could spread to other countries in the region have abated,
at least for now.
Egyptian President Hosni Mubarak said on Tuesday he would
step down in a few months once a successor was elected, although
it remains to be seen if that will satisfies protesters, with
many wanting him out immediately.
"It's unclear if the chaos in Egypt is coming to an end. But
at least it's not affecting financial markets," said a trader at
a Japanese bank.
The dollar rose 0.1 percent on the day to 81.48 yen but
remained near a four-week low of 81.31 yen <JPY=> hit on Tuesday.
Option-related bids near 81.30 yen are supporting the U.S.
currency. In addition, a trendline connecting a Nov. 1 trough of
80.21 and a Jan. 3 low of 80.94 comes in around 81.25-30.
A clear break of this level could open the way for a test of
the Nov. 1 low, which sits just above a record low of 79.75
marked in 1995.
The dollar's fall came even as U.S. bond yields rose a tad on
Tuesday, which tends to help the dollar against the low-yielding
yen, leading some traders to expect more weakness in the dollar
against the yen in the near term.
If the U.S. payroll data falls short of expectations, that
could push the dollar below 81 yen, said Daisuke Karakama, a
market economist at Mizuho Corporate Bank.
The greenback was also within striking distance of a record
low against the Swiss franc, falling 0.2 percent on the day to as
low as 0.9329 franc <CHF=>, compared with its record low of
0.9301 hit late last year.
(Editing by Michael Watson)
