LONDON (Reuters) - The dollar held onto the previous session's gains versus the euro on Wednesday after rising off recent four-year lows on a tired single currency, while fears of Japanese authorities buying greenbacks gave it added support.
Investors were also looking at fresh comments from U.S. Treasury Secretary John Snow, who reaffirmed his administration's "strong dollar" policy after sparking bouts of dollar-selling earlier this week by casting doubts over it.
But markets were unconvinced about Washington's desire for a strong dollar following a succession of multi-year lows versus major currencies in the face of weak economic prospects in the United States. Many expect the euro to resume its rise soon.
"Dips in the euro are seen as good opportunities to reinstate long positions," said Kamal Sharma, currency strategist at Commerzbank.
"Nobody believes the strong dollar policy is a policy in anything but name."
At 5:50 a.m. EDT, the dollar was slightly up against the euro from the previous session at $1.1495, after gaining more than a cent from the latest four-year lows of $1.1623 on Monday.
Against the yen, the dollar was flat on the day at 116.76, but up from recent 10-month lows around 116 yen.
RATES AND BOJ IN FOCUS
Markets were apprehensive about testing Japan's resolve to intervene in the market after traders detected the Bank of Japan selling yen for dollars in the previous session.
"I certainly think it (intervention) is a factor on players' minds.... Clearly levels between 116 and 116.50/60 are the danger levels," said Derek Halpenny, currency economist at Bank of Tokyo Mitsubishi.
Japan's Finance Ministry denied Tokyo was seeking a weaker yen to help exporters and said it only wanted to prevent excessive market moves.
Markets were nevertheless edgy after Chief Cabinet Secretary Yasuo Fukuda issued a fresh warning the government should act "decisively" against rapid moves in the market.
Japanese Finance Minister Masajuro Shiokawa said he did not see foreign exchange being an issue in talks with U.S. Treasury Secretary John Snow on the sidelines of a Group of Seven (G7) meeting this weekend.
The dollar was also helped earlier by Tuesday's comments from European Central Bank (ECB) Governing Council member Ernst Welteke, who said the bank could have room for interest rate cuts.
However, he was also quoted on Wednesday as saying monetary policy was helping rather than hindering the euro zone economy.
"The euro seems to have run out of steam. Welteke's comments yesterday...will temper further euro gains from here," said Halpenny.
The U.S. economic outlook is also on the front-burner with markets looking to a series of indicators due later this week.
Retail sales data for April is due at 8:30 a.m. EDT. Economists surveyed by Reuters expect sales to have risen 0.4 percent, or 0.1 percent excluding autos, in April. That would be slower than gains of 2.1 percent, or 1.2 percent excluding autos, in March.
That data will be followed by producer prices inflation, industrial production and the Philadelphia Fed's survey of mid- Atlantic manufacturing activity, due on Thursday.
Investors were also looking at fresh comments from U.S. Treasury Secretary John Snow, who reaffirmed his administration's "strong dollar" policy after sparking bouts of dollar-selling earlier this week by casting doubts over it.
But markets were unconvinced about Washington's desire for a strong dollar following a succession of multi-year lows versus major currencies in the face of weak economic prospects in the United States. Many expect the euro to resume its rise soon.
"Dips in the euro are seen as good opportunities to reinstate long positions," said Kamal Sharma, currency strategist at Commerzbank.
"Nobody believes the strong dollar policy is a policy in anything but name."
At 5:50 a.m. EDT, the dollar was slightly up against the euro from the previous session at $1.1495, after gaining more than a cent from the latest four-year lows of $1.1623 on Monday.
Against the yen, the dollar was flat on the day at 116.76, but up from recent 10-month lows around 116 yen.
RATES AND BOJ IN FOCUS
Markets were apprehensive about testing Japan's resolve to intervene in the market after traders detected the Bank of Japan selling yen for dollars in the previous session.
"I certainly think it (intervention) is a factor on players' minds.... Clearly levels between 116 and 116.50/60 are the danger levels," said Derek Halpenny, currency economist at Bank of Tokyo Mitsubishi.
Japan's Finance Ministry denied Tokyo was seeking a weaker yen to help exporters and said it only wanted to prevent excessive market moves.
Markets were nevertheless edgy after Chief Cabinet Secretary Yasuo Fukuda issued a fresh warning the government should act "decisively" against rapid moves in the market.
Japanese Finance Minister Masajuro Shiokawa said he did not see foreign exchange being an issue in talks with U.S. Treasury Secretary John Snow on the sidelines of a Group of Seven (G7) meeting this weekend.
The dollar was also helped earlier by Tuesday's comments from European Central Bank (ECB) Governing Council member Ernst Welteke, who said the bank could have room for interest rate cuts.
However, he was also quoted on Wednesday as saying monetary policy was helping rather than hindering the euro zone economy.
"The euro seems to have run out of steam. Welteke's comments yesterday...will temper further euro gains from here," said Halpenny.
The U.S. economic outlook is also on the front-burner with markets looking to a series of indicators due later this week.
Retail sales data for April is due at 8:30 a.m. EDT. Economists surveyed by Reuters expect sales to have risen 0.4 percent, or 0.1 percent excluding autos, in April. That would be slower than gains of 2.1 percent, or 1.2 percent excluding autos, in March.
That data will be followed by producer prices inflation, industrial production and the Philadelphia Fed's survey of mid- Atlantic manufacturing activity, due on Thursday.
