* Euro strong below $1.40 after Fed minutes, Weber comments
* Euro break above $1.4025-45 would open way to more gains
* Dollar up vs yen, at record low vs Swissie, index soft
(Adds quote, updates prices)
By Anirban Nag
LONDON, Oct 13 (Reuters) - The dollar came under broad
selling pressure on Wednesday, with investors pushing it towards
key lows against the euro, the Swiss franc and a basket of
currencies on more signs pointing to U.S. monetary easing.
The euro hit $1.40 in European trade and looked set to
challenge its eight-month high at $1.4030 after Federal Reserve
minutes on Tuesday reinforced expectations of more quantitative
easing. []
Dealers said hawkish comments on Tuesday from European
Central Bank Governing Council member Axel Weber highlighted the
difference in direction between Fed and ECB policy, giving the
euro an added lift. []
The euro struggled to sustain a move above the key
psychological $1.40 level, however. A firm break above
$1.4025-45, particularly a weekly close above $1.4030, was seen
heralding further gains.
"Little has changed on the dollar front, but more QE from
the Fed has now become more of a likely reality," said Neil
Mellor, currency strategist at Bank of New York Mellon.
"The market wants to sell the dollar, but there is
inevitably nervousness ahead of key levels." In addition to
$1.40 in euro/dollar, he cited $1.60 in sterling and $0.99 in
the Australian dollar versus the U.S. dollar.
At 1137 GMT, the euro <EUR=> was up 0.3 percent at $1.3969
after earlier briefly peeping above $1.40 on steady buying by
Asian central banks, but traders and analysts said stops and
options barriers at that level were helping cap gains.
The single currency gained across the board, climbing
against the yen <EURJPY=R>, sterling <EURGBP=D4> and the Swiss
franc <EURCHF=R>.
"In the G4 space, the ECB is the only central bank that is
talking of an exit policy and that is helping the euro," said
Ankita Dudani, G-10 currency strategist at RBS.
The dollar index <.DXY> was down 0.35 percent at 77.093, not
far from a nine-month low of 76.906 set last week. It has shed
more than 4 percent since the Fed's last meeting on Sept. 21.
The dollar also eased to a record low of 0.9546 Swiss francs
<CHF=> while the Australian dollar <AUD=D4> was at $0.9883,
edging back towards last week's 28-year high of $0.9918.
FED QE PRICED IN?
Minutes of the Fed's Sept. 21 meeting showed officials
thought the struggling U.S. recovery might soon need more help
and they discussed ways to provide it, including adopting a
price-level target and buying longer-term U.S. government debt.
The market has gone very short of dollars on QE expectations
recently and some analysts say this raises the risk of a
rebound, particularly if the Fed opts for a much smaller QE
programme than the $1 trillion in asset purchases some forecast.
[]
"The move is already priced in. If anything we will see the
dollar strengthening, especially if they come out with a
conservative plan to feed the QE gradually," said Chris
Huddleston, head of money markets at Investec Treasury
Solutions.
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Currency tensions map: http://r.reuters.com/jec96p
PDF report on currencies: http://r.reuters.com/gez77p
Graphic on futures positioning http://r.reuters.com/kus26k
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The dollar was steady against the yen at 81.79 yen <JPY=>,
supported by nervousness that Japanese authorities could
intervene the closer it gets to its record low of 79.75 yen. The
dollar hit a 15-year low of 81.37 yen on Monday.
(Additional reporting by Jessica Mortimer)
