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FOREX-Dollar bounce holds as traders trim short bets

Published 03/09/2020, 11:09 am
Updated 03/09/2020, 11:12 am
© Reuters.
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* Dollar posts first consecutive sessions of gains since June

* Euro retreats from $1.20 as investors take profit

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook

SINGAPORE, Sept 3 (Reuters) - The dollar clung to overnight gains on Thursday, as investors trimmed bets against the greenback and sold the euro on concerns that the European Central Bank was worried about its rise.

The bounce has lifted the greenback about 1% above the 28-month low it hit against a basket of currencies on Tuesday and brought its first back-to-back daily gains since June =USD .

Few analysts expect it to hold for too long but it was steady in morning trade, inching about 0.1% firmer on the Australian dollar, kiwi, euro and pound as investors position themselves ahead of U.S. jobs data due on Friday.

"You could put (the dollar bounce) down to a bit of a trend reversal, it's had a long run downwards," said BNZ senior markets strategist Jason Wong. "But if it is a floor, it's only a short term one," he said.

"It's probably just a pause. Everyone's pretty bearish dollars for good reason," he added, pointing to the Federal Reserve's policy outlook that will likely keep rates very low for a long time.

The drop in the euro extended its retreat from the $1.20 mark, which had begun on Tuesday after the ECB's chief economist Philip Lane said the euro-dollar rate "does matter" for monetary policy - suggesting the bank might do something about it.

Ray Attrill, head of FX strategy at National Australia Bank in Sydney said that was unlikely, but that "Lane's comments were the excuse for some traders to take profits on long euro positions" that had begun to look stretched.

The value of euro longs stood at a record high last week EURNETUSD= .

The euro EUR=EBS was last at $1.1836, having fallen half a percent overnight, and it made a fresh three-month low of 88.71 pence EURGBP= . The pound GBP= slipped to $1.3338, but was above an overnight trough of $1.3284.

The Australian dollar AUD=D3 dipped to $0.7331 and the kiwi NZD=D3 was a touch softer at $0.6764, though it has put up the toughest fight against the dollar's bounce and is only about 0.4% below a 13-month high touched on Wednesday.

The Japanese yen JPY= is gradually settling back towards where it was before Shinzo Abe resigned as Prime Minister as his close ally Yoshihide Suga firms as the favourite to succeed him.

Suga formally declared his candidacy for the Liberal Democratic Party leadership on Wednesday and he is expected to persist with Abe's aggressive fiscal and monetary stimulus policies. yen slipped marginally to 106.21 per dollar.

Ahead on Thursday are purchasing managers index figures in Asia, Europe and the United States. Markets are also awaiting U.S. payrolls figures on Friday.

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