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FOREX-Nowotny easing talk nudges euro lower

Published 15/10/2015, 10:49 pm
© Reuters.  FOREX-Nowotny easing talk nudges euro lower
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* Euro retreats as ECB's Nowotny says need to act "obvious"

* Weak U.S. data keeps pressure on dollar

* Aussie and kiwi dollars big gainers again

By Patrick Graham

LONDON, Oct 15 (Reuters) - The dollar repelled an attack by the euro on $1.15 on Thursday, helped by comments by European Central Bank policymaker Ewald Nowotny, who said it was "obvious" the bank must search for more ways to stimulate the euro zone economy.

The dollar has fallen against the basket of currencies used to measure its broader strength in five of the past six weeks and it lost more ground against the yen and Australian and New Zealand dollars in morning trade in Europe.

But three straight weeks of gains for the euro in that time have left the single currency more exposed to some retracement and profit-taking by those who have made money over the past year.

Nowotny's comments underlined the big policy risk to the euro, namely that a slowdown in global growth will provoke the ECB into pumping yet more euros into the market than it has already promised.

"Our positioning analysis this week showed the market is quite long euro-dollar and that makes the euro very susceptible to any of this kind of talk," said Michael Sneyd, a strategist with French bank BNP Paribas (PA:BNPP) in London.

"Its also quite compelling if you look at the charts that $1.15 is seen as a ceiling. There's a lot of people in the market who will want to fade any euro strength up here and Nowotny's comments provide a good opportunity."

By 1135 GMT, the euro was down a third of a percent on the day at $1.1433, having risen as high as $1.1495, its strongest since Aug. 26.

While the euro move gave the dollar some respite, there is a broad feeling that the strong dollar environment that has dominated the past 18 months is fading.

Strategists from Dutch bank ABN Amro were the latest to close a pro-dollar recommendation that dates back to November 2013.

"It is likely that EUR/USD in the near-term will continue to move higher in wake of the pricing out of a possible Fed rate hike this year," ABN strategist Georgette Boele said.

"Moreover, the recovery in the US dollar we expect for the coming months is relatively modest."

The dollar index .DXY was last trading 0.2 percent stronger at 94.082, just above seven-week lows hit overnight.

The yen gained around half a percent to an eight-week high of 118.10 yen per dollar. The New Zealand dollar gained as much as 1.5 percent to a 3-1/2 month high of $0.6897.

"Generally the theme is still dollar weakness across the board, because the market is pricing out a rate hike this year," said Thu Lan Nguyen, a currency analyst with Commerzbank (DE:CBKG) in Frankfurt. "I don't see anything that will change that in the next couple of weeks." (Editing by Andrew Roche)

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