By Eric Burroughs
TOKYO, May 12 (Reuters) - The dollar climbed back towards a
two-month high versus a basket of currencies on Monday as weak
economic data in Australia and New Zealand showed more signs of a
global slowdown, giving the battered U.S. currency a boost.
A survey showed business confidence in Australia hitting the
lowest since September 2001 and housing finance falling sharply,
while a report in New Zealand showed housing price gains slowing
for an eighth straight month and projected to fall.
After the dollar tumbled following the Federal Reserve's
aggressive interest rate cuts and efforts to pump cash into
locked-up money markets, the Fed is now seen on hold and
expectations are mounting for other central banks to cut rates.
In the case of New Zealand, the country's central bank is now
seen slashing rates by up to 125 basis points over the next year
and thereby eroding the allure of the New Zealand dollar's 8.25
percent rate -- the highest among industrialised economies.
But while analysts said there were many reasons for a fall in
the kiwi, the case for a slide in the Australian dollar was not
so clear cut as the country's labour market is robust and steep
commodity prices provide an economic boon.
"It may be the beginning of a downtrend for the Aussie but
I'm not convinced the Aussie will collapse from here," said
Masafumi Yamamoto, head of FX strategy for Japan at Royal Bank of
Scotland.
The New Zealand dollar slid to a four-month low against the
U.S. dollar after Monday's data, but the Aussie remains not far
away from a 24-year peak struck against the greenback last month.
The dollar rose to 103.30 yen <JPY=>, gaining 0.5 percent
from late U.S. trade on Friday.
Traders said dollar buying by some players such as Japanese
importers, which are grappling with the steep rise in commodity
prices, helped lift the U.S. currency in early trade.
The yen gave up initial gains and slipped as Japanese stock
markets were resilient to oil prices holding at record peaks near
$126 a barrel. The Nikkei average <> gained 0.7 percent.
Market players use the performance of stocks as a gauge of
risk appetite and whether to hold carry trades -- borrowing the
low-yielding yen to buy higher-yielding currencies.
The euro slipped 0.5 percent to $1.5409 <EUR=> but was little
changed against the yen at 159.17 yen <EURJPY=R>.
The Australian dollar shed 0.5 percent to $0.9373 <AUD=D4>,
while the New Zealand dollar dropped 0.6 percent to $0.7648.
But helping prop up both currencies was steady buying by
Japanese retail investors and traders frustrated by persistently
low yields available at home.
Data from the Tokyo Financial Exchange showed Japanese margin
traders -- who make leveraged bets on currencies with borrowed
funds -- snapped up a record one-day amount of New Zealand
dollars last Thursday. []
The dollar index, which tracks the dollar's value against a
basket of major currencies, rose 0.3 percent to 73.345 <.DXY>,
edging back towards a two-month high of 73.895 hit last week.
G7 AND EURO SLOWDOWN
Some market players said the dollar was helped by a report
from last week in the Wall Street Journal saying U.S. officials
were behind the push among Group of Seven powers to toughen
language on currency volatility aimed at the U.S. currency's
tumble.
The report followed a similar one in the Financial Times last
week saying investors were focusing too much on short-term
problems in the United States than the medium-term growth outlook
in Europe.
Mounting signs that European growth is stumbling has stirred
speculation the European Central Bank could tiptoe towards
trimming rates.
A string of poor economic data in the euro zone, along with
the outlook for the Fed to keep rates steady, drove the dollar's
rebound to two-month highs against the euro and a basket of major
currencies last week.
"It will take time for markets to make conclusions about the
relative monetary policy outlooks," said Tomoko Fujii, head of
Japan economics and strategy at Bank of America. "It is not easy
to draw conclusions about whether the Fed is really done or not."
(Additional reporting by Masayuki Kitano, Editing by Michael
Watson)
