950817

Dollar regroups

in Europe for next

upside attack

LONDON: The upwardly-mobile dollar settled into consolidation in early Europe as it recharged its batteries for the next push higher.

A corrective period was inevitable after the recent sharp upswing but the dollar's bullish bias should allow it to make further gains, albeit at a steadier pace, traders said.

"Even if these currencies are heavily out of line, you cannot expect such moves to continue," said Graham Cocks, vice-president, treasury at Bank of Boston here.

The fear that central banks will repeat their pro-dollar intervention of Tuesday was seen holding sellers back.

The dollar was trading at 97.80 yen and 1.4791/96 marks by 0801 GMT, slightly stronger than late Wednesday's European levels of 97.70/75 and 1.4748/58.

It reached 98.45 yen and 1.4825 marks in Asia overnight.

Buying the dollar on dips remained the favoured strategy, and analysts noted that the dips in yesterday's trading had been shallow, reinforcing a rosy technical outlook for the currency.

But some sounded a note of caution. "There is a hidden warning in this accelerated move higher -- an accelerated rise is the tell-tale hallmark of a trend-ending," said Howard Wright, chief technical analyst at Prisma Market Analysts U.K.

There was, however, a long way to go before the dollar slipped into decline, he added.

Tuesday's intervention by the Bundesbank, Federal Reserve, Bank of Japan had left a market long in dollars highly wary of shedding them, traders said.

But the U.S. unit could come under heavy pressure as it neared the magic 100 yen target, said Cocks at Bank of Boston.

U.S. trade figures for June are due out at 1230 GMT, with expectations averaging a 10.7 billion deficit compared with 1.43 billion last time.

The numbers will be watched in the light of the surprising shrinkage in Japan's July trade surplus, which sent the dollar shooting upwards early on Tuesday.

Market watchers are divided over the impact the U.S. data will have, with some arguing it will be limited as the later Japan figure is already known.

Some said there could be a knee-jerk reaction to a weak number, but others said the market was too bullish to care.

Although dollar/yen has led the way in the recent rally, dollar/mark has followed the upward path and will also correct before pushing on further, chartists believed.

The dollar must hold its overnight low of 1.4720 marks to allow it to drive on to the 1.5000 level, they said.

Sterling remained weak against the dollar, trading at $1.5420/30 compared to late Wednesday's European level of $1.5518/28. Its obsession with dollar direction meant it reacted little to data showing U.K. retail prices fell by a bigger-than-expected margin in July.-Reuter