A holiday in much of Europe thinned out trading and analysts said
action might be limited until the United States came on line later,
with a second estimate of U.S. second quarter growth the day's data
The euro has fallen to a three-month low this week as expectations
solidified for a multi-pronged attack on monetary policy by the
European Central Bank next week. It was holding steady just above
support at $1.3583 on Thursday. EUR=EBS
The Aussie was driven higher by data on business investment which
showed planned spending for 2014/15 jumped to A$137 billion, from an
earlier estimate of A$125 billion, overshadowing a dip in such
spending in the first quarter.
"The interesting thing about the Australian economy is that it is
showing some signs of divergence away from China," said Christian
Lawrence, a currency strategist at Rabobank in London.
"There is an increasing feeling that Australia can weather the
slowdown in China better than people previously thought."
In early trading in Europe, the Aussie was up 0.54 percent at
$0.9286. The currency has held between longer-term support around
$0.92 and its 21-day moving average at $0.93 for the past two weeks.
Dealers said it may struggle to break out of that range in the near
Both the pound and the euro recovered a foothold after falling
through barriers respectively at $1.36 and $1.67 in the previous
For sterling, one of the past year's big winners, the fall this week
has led some to wonder whether its rally against the dollar has
peaked. Thursday's pause underlined the fact that the jury, for
many, is still out.
Citibank analyst Josh O'Byrne said the pound might in particular
have room to recover against the euro.
"The pound selloff could be driven by temporary factors like
month-end corporate hedging as well as unwinding of bets on
favorable M&A flows," he said.
"While some cautiousness maybe warranted ahead of the mortgage
lending data next Monday, we believe that (the) recent move higher
in EURGBP could offer an interesting selling opportunity ahead of
the ECB meeting next week."
The pound traded roughly flat at $1.6703 GBP=D4 and just 0.04
percent higher at 81.36 pence per euro EURGBP=D4.
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The dollar hovered near a two-month high against a basket of major
currencies, also taking a pause after rallying on the back of the
slide for sterling, the euro and a number of developing world
The dollar index .DXY eased less than 0.1 percent to 80.525, within
sight of Wednesday's high of 80.581, its best since early April.
Expectations of policy action from the ECB have been mounting, a key
reason for the recent underperformance in the euro. A Reuters poll
of 48 economists showed a clear majority expect the ECB to cut its
deposit rate into negative territory next week, a view reinforced
for many in the market by policymakers' comments this week. (Full
Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui
Banking Corporation in Singapore, said the euro would stay on the
defensive going into the ECB meeting on June 5.
Still, the recent decline in U.S. bond yields may help limit the
scope of the euro's declines against the dollar, he added.
"Given how much U.S. yields have fallen, I doubt that you can chase
the dollar higher that aggressively although there may be some
short-covering," Okagawa said.
(Additional reporting by Ian Chua in Sydney and Masayuki Kitano in
Singapore; Editing by John Stonestreet)
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