TOKYO, June 24 (Reuters) – The dollar stayed on the defensive on Thursday after the Federal Reserve reiterated its pledge to keep rates low, while the Australian dollar edged up after the country’s ruling party chose a new Prime Minister, reducing political uncertainty there.

The dollar’s broad weakness helped the euro to trade firmly and sterling to extend gains to a six-week high, yet traders remained reluctant to chase those advances with more signs of fragile economic recovery tempering appetite for risky positions.

“The dollar is clearly under pressure after the FOMC indicated that interest rates will not rise anytime soon. But there is no other currency good enough to buy against the dollar either,” said Nobuhiko Akai, senior manager of the forex trading group at Bank of Tokyo-Mitsubishi UFJ.

“The euro’s limited gains against the dollar reflect deep-seated market concerns about more bad news from the region’s debt or banking sector.”

The Aussie AUD=D4 rose as high as $0.8771 after Australia’s ruling Labor Party elected a new Prime Minister in Julia Gillard, in a bid to avoid election defeat later this year. [ID:nSGE65M0LY]

“Clearly this is a positive for the Australian dollar and stocks in the short and medium term,” said Su-Lin Ong, a senior economist at RBC Capital Markets.

“It removes the political uncertainty that had been growing and would have only got worse. We assume Gillard will negotiate on the mining tax and produce a watered-down version.”

TOKYO (Reuters) – The dollar stayed on the defensive on Thursday after the Federal Reserve reiterated its pledge to keep rates low, while the Australian dollar edged up after the country’s ruling party chose a new Prime Minister, reducing political uncertainty there.

The dollar’s broad weakness helped the euro to trade firmly and sterling to extend gains to a six-week high, yet traders remained reluctant to chase those advances with more signs of fragile economic recovery reducing appetite for risky positions.

“The dollar is clearly under pressure after the FOMC indicated that interest rates will not rise anytime soon. But there is no other currency good enough to buy against the dollar either,” said Nobuhiko Akai, senior manager of the forex trading group at Bank of Tokyo-Mitsubishi UFJ.

“The euro’s limited gains against the dollar reflect deep-seated market concerns about more bad news from the region’s debt or banking sector.”

The Aussie rose as high as $0.8771 after Australia’s ruling Labor Party elected a new Prime Minister in Julia Gillard, in a bid to avoid election defeat later this year.

That stirred hopes the government would dilute a controversial mining tax that had unsettled offshore investors.

“Clearly this is a positive for the Australian dollar and stocks in the short and medium term,” said Su-Lin Ong, a senior economist at RBC Capital Markets.

TOKYO, June 21 (Reuters) – The Australian dollar and the euro jumped to their highest levels in about a month against the dollar on Monday after China allowed the yuan to rise to a post-revaluation high, boosting confidence in the global economy.

Spot yuan rose to its highest level since its revaluation five years ago, helping to reinforce market optimism that a pledge from China on yuan flexibility would help reduce the global imbalance, encouraging sustained global growth and supporting higher-yielding and riskier assets. [ID:nBJD003795]

“China’s commitment to allowing more yuan flexibility is definitely an encouraging factor for stability in the market,” said Hideki Amikura, deputy general manager of the forex section at Nomura Trust Bank.

“It is a sign that China is ready to act responsibly to fix global imbalances and avoid potential international conflicts,” he said.

The yuan rose as high as about 0.4 percent to 6.8015 per dollar CNY=CFXS after China broke away from its 23-month-old currency peg.

That was enough for the the Aussie and the euro to recover from initial disappointment after China set the yuan’s daily mid-point CNY=SAEC at 6.8275 against the dollar on Monday, unchanged from last Friday, the day before Beijing said it would allow the yuan to trade more flexibly.

“You can’t gauge Beijing’s stance on the yuan just from today’s mid-point. Obviously we will have to see how much yuan appreciation they allow for the time being,” said Shuichi Kanehira, head of forex spot trading at Mizuho Corporate Bank.

TOKYO, June 21 (Reuters) – The Australian dollar cut some of its earlier sharp gains and the euro pulled back from a four-week high against the dollar on Monday after a sign that China would proceed only gradually in its push to make the yuan more flexible.

China’s central bank set the yuan’s daily mid-point CNY=SAEC at 6.8275 against the dollar on Monday, unchanged from last Friday, the day before Beijing said it would allow the yuan to trade more flexibly.

This initially disappointed some market players who had expected a strengthening of about 0.5 percent for Monday’s central bank fixing after the country indicated it was ready to break a 23-month-old U.S. dollar peg that had come under intense fire from abroad.[ID:nSGE65I02M]

But Spot yuan rose to its highest since 2008 against the dollar, and market optimism remained that China’s pledge on yuan flexibility was a vote of confidence in the global economic recovery’s staying power, helping higher-yielding and riskier assets such as the Australian dollar and U.S. stock futures to hold strength, traders said. [ID:nBJD003795]

“China’s commitment to allowing more yuan flexibility is definitely an encouraging factor for stability in the market,” said Hideki Amikura, deputy general manager of the forex section at Nomura Trust Bank.

“It is a sign that China is ready to act responsibly to fix global imbalances and avoid potential international conflicts,” he said.

The Aussie AUD=D4 retreated from its earlier high around $0.8830, a one-month peak, after the yuan mid-point was announced, but held firmly at $0.8806 AUD=D4, up 1 percent on the day.

TOKYO (Reuters) – The Australian dollar jumped more than 1 percent and the euro hit a four–week high against the U.S. dollar on Monday as investors took China’s commitment to allow more yuan flexibility as a signal to buy riskier assets.

China said on Saturday it would gradually make the yuan’s exchange rate more flexible, indicating it was ready to break a 23-month-old U.S. dollar peg that had come under intense fire from abroad.

Investors were now waiting to see where Chinese authorities would actually set the yuan’s mid-point against the U.S. dollar later on Monday and to see how flexible the yuan becomes.

China’s central bank set the yuan’s daily mid-point at 6.8275 against the dollar on Friday.

The dollar recovered some of its earlier losses against the Australian dollar, euro and yen, as speculators cut short positions on the expectation that the yuan’s appreciation against the dollar would be a gradual one.

“We expect to see a visible move in the CNY/USD rate, but constrained by the 0.5 percent trading band,” said Scott Haslem, chief economist at UBS in Sydney.

The Aussie climbed more than 1 percent to a one-month high of $0.8830, before steadying around $0.8810, up from $0.8703 late in New York on Friday.

TOKYO, June 18 (Reuters) – The euro held at three-week highs on Friday, on track for its second straight week of gains, while the dollar appeared vulnerable to further losses after falling below a key chart level.

The euro retained gains near $1.24 as investors liquidated short positions after solid demand at Spanish bond auctions, which also encouraged some investors to shift funds back to euro zone bonds from safe-haven U.S. Treasuries, traders said.

Peripheral European debt markets calmed after the auction, whetting investors’ appetite for riskier assets and supporting higher-yielding currencies like the Australian AUD=D4 and New Zealand dollars NZD=D4 which touched one-month highs.

“While the news flow out of Europe started the week negative, a good Spanish bond auction overnight and the potential for a coordinated bank stress test across the euro area … has bolstered investor confidence that European officials are beginning to get things right,” Barclays Capital said in a note to clients.

The euro EUR= rose as far as $1.2414, a three-week peak, and held at $1.2400 after gaining 0.6 percent on Thursday.

It has advanced more than 2 percent so far this week, overcoming a Moody’s downgrade of Greece’s credit rating to junk status and pulling further away from a four-year low of $1.1876 struck on June 7.

Traders said there were some light stops lined up above the day’s high, with near-term resistance at $1.2457, the single currency’s 2009 low hit during the global financial crisis.

TOKYO (Reuters) – The euro held steady near three-week highs on Friday, on track for its second straight week of gains, while the dollar appeared vulnerable to further losses after falling below a key chart level.

The euro retained gains near $1.24 as investors liquidated short positions after a robust response to Spanish bond auctions, which also encouraged some investors to shift funds back to euro zone bonds from safe-haven U.S. Treasuries, traders said.

Peripheral European debt markets calmed after the auction, whetting investors’ appetite for riskier assets and supporting higher-yielding currencies like the Australian and New Zealand dollars which hovered near one-month highs.

“While the news flow out of Europe started the week negative, a good Spanish bond auction overnight and the potential for a coordinated bank stress test across the euro area … has bolstered investor confidence that European officials are beginning to get things right,” Barclays Capital said in a note to clients.

The euro was little changed at $1.2388, having gained 0.6 percent on Thursday, when it rose to as high as $1.2413 on trading platform EBS.

It has advanced more than 2 percent so far this week, overcoming a Moody’s downgrade of Greece’s credit rating to junk status and pulling away from a four-year low of $1.1876 struck on June 7.

Traders said there were some light stops lined up above $1.2413 with near-term resistance at $1.2457, the single currency’s 2009 low hit during the global financial crisis.

TOKYO, June 15 (Reuters) – The euro’s rally showed signs of fading on Tuesday, with investors taking profits and sentiment towards the single currency staying fragile as debt worries returned after Moody’s cut Greece’s credit rating to junk grade.

The Australian dollar pulled back further from a one-month high versus the U.S. dollar as traders reduced demand for higher-yielding currencies after minutes of an Australian central bank meeting confirmed the market view that interest rates will be on hold at least for the next month. [ID:nSYC002333]

Traders said with the euro EUR= failing to break near term resistance at around $1.23, the single currency’s impressive run in the past few sessions was showing signs of fizzling.

“The euro would need more than short-covering to move decisively up from here,” said a senior trader at a Japanese securities house, adding that the market still looked vulnerable to euro-negative news given shaky equity markets.

The euro was at $1.2204 EUR=, down 0.1 percent from late New York trade on Monday, retreating further from the previous day’s high of $1.2298 on trading platform EBS.

Traders said Moody’s downgrade was being used by investors as an excuse to pare positions in the single currency. Moody’s cut Greece’s credit rating to junk status and said the country faced substantial risks. [ID:nWNA3381].

The Moody’s downgrade could still have an affect in the background, but an overall revival in risk appetite may check sharp losses, traders said.

TOKYO (Reuters) – Hedge funds and foreign investors are building up protection on Japanese government bonds in the credit default swaps market, underscoring persistent worries about Japan’s poor fiscal health and suggesting that JGBs could be shaken by CDS moves in the near future.

The outstanding volume of CDS written on JGBs has doubled in the past eight months as Europe’s sovereign debt crisis has made anxious banks and investors hedge their exposure to Japan, the most heavily indebted of the major economies.

Japan’s public debt — totalling nearly 200 percent of GDP — has long been financed domestically from the country’s massive pool of savings that mostly sits in the banking system and is recycled into JGBs.

But fears are growing that the ageing population will start drawing on that pool of savings, forcing Japan to rely on foreign investors to fund its debt and potentially creating market instability.

New Prime Minister Naoto Kan, who has vowed to start fixing the tattered finances, warned on Friday Japan risked default if it failed to act, and investors are not convinced it has been taking enough steps to head off a crisis down the road.

Graphic on CDS spread/volume, click link.reuters.com/xag59k

While other sovereign CDS spreads have shrunk this week along with a rebound in stock markets, Japanese sovereign CDS spreads have edged out to 99 basis points, pushing back towards a record peak of 130 basis points and up from 3 basis points just three years ago.

TOKYO, June 10 (Reuters) – The Australian dollar jumped on Thursday on upbeat Aussie jobs data and strong Chinese exports, while the euro bounced on short-covering after the head of China’s national pension fund said the currency would weather Europe’s debt crisis.

A stronger-than-expected rise in Australian employment numbers for May and a near 50 percent surge in Chinese exports the same month ran counter to persistent fears the global economy was starting to falter amid euro zone debt woes.

Dai Xianglong, chairman of $114 billion China’s National Social Security Fund, said the euro would gradually stabilise and that the U.S. fiscal deficit remained a big concern. [ID:nTOE659041]

The euro rose 0.7 percent on the day to around $1.2059 EUR=EBS and at one point climbed as high as $1.2064, up more than one U.S. cent from an earlier low of $1.1957.

It has risen about 1.5 percent since hitting a four-year low of $1.1876 on trading platform EBS on Monday.

“Traders are buying back the euro for now but there aren’t strong factors to support the euro. I expect the euro will meet solid resistance near $1.22,” said Koji Fukaya, a senior currency analyst at Deutsche Bank in Tokyo.

Traders expect the euro to come under pressure again after short-covering runs its course, with many market players looking to see if the European Central Bank, which meets later in the day, plans new efforts to help troubled euro zone countries.