Dollar edges off seven-week low, China production data in focus

By Dominic Lau

TOKYO (Reuters) - The dollar steadied above seven-week lows on Friday but remained vulnerable to more losses if Chinese industrial production data adds to a growing view Beijing was taming its economic slowdown, while Japanese shares are set for a heavy weekly fall.

Copper retreated from a near two-month high after unexpected strength in trade data from top buyer China on Thursday raised hopes of a pick-up in demand.

The dollar <.dxy> inched up 0.1 percent against a basket of major currencies, having fallen for five days in a row -- its longest such streak since mid-June -- on uncertainty about when the U.S. Federal Reserve would start winding back its stimulus.

If Chinese industrial production data on Friday further suggest stabilization in the world's second-largest economy after a slowdown that has run for more than two years, risk-seeking investors would be more confident about switching out of the dollar.

China's annual consumer prices in July rose 2.7 percent, unchanged from the previous month and broadly in line with market expectations.

"The investment climate isn't bad, as U.S. and Chinese data show improvement," said IM Investment & Securities analyst Kang Hyun-gie. "A batch of new Chinese data coming out later will certainly function as a catalyst for the market today."

The Australian dollar, which is seen as a proxy for Chinese growth as China imports a lot of its raw materials and products, was up 0.2 percent at $0.9120 on the day. It pulled further away from a three-year trough touched earlier this week ahead of its central bank's rate cut to a record low of 2.5 percent.

The Reserve Bank of Australia on Friday trimmed its near-term economic outlook, projecting a sub par performance out to the middle of next year as a long boom in mining investment cools faster than first thought.

NIKKEI'S WEEKLY LOSS

With the dollar steady at 96.65 yen, Tokyo's Nikkei share average <.n225> pared early gains, up 0.5 percent. Still the Nikkei hit a six-week low on Thursday and is down more than 5 percent this week as the yen has strengthened.

"Although the dollar rebounded against the yen yesterday, it doesn't feel like it has bottomed out. The chart looks still very weak and I suspect there's a chance the dollar will test 95 yen in the near future," a trader at a Japanese bank said.

The euro hovered near a seven-week high versus the dollar at $1.33830.

Asian shares as measured by MSCI Asia-Pacific ex-Japan <.miapj0000pus> were steady after gaining nearly 1 percent on Thursday.

Japanese shares' 12-month forward price-to-earnings ratio has fallen to 13.8 from a two-month high of 14.8 hit last week, according to Thomson Reuters Datastream.

Valuations for the MSCI Asian gauge have also eased to 11.4 from a two-month high of 11.5 reached last week.

In the commodities markets, copper prices fell 0.3 percent to around $7,165 a ton after climbing 2.6 percent to a near two-month high after the Chinese trade data.

Gold added 0.2 percent, extending Thursday's 1.9 percent rise. Brent crude prices advanced 0.4 percent to near $107 a barrel and was on track to end a five-day run of losses - its longest such streak since mid-April.

(Additional reporting by Jungmin Jang in SEOUL and Hideyuki Sano in TOKYO; Editing by Jacqueline Wong)

Source: http://news.yahoo.com/dollar-edges-off-seven-week-low-china-data-014713667.html

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