By: Hillel Fuld
The USD steadied on Thursday after it enjoyed a rare rally the previous day when U.S. data exceeded expectations and sparked a bout of short-covering, although the overall mood remains bearish ahead of a key payrolls report.
Against the JPY, the dollar was down 0.1 percent on the day at 86.19 having bounced from an eight-month low of 85.32 yen hit yesterday.
Traders said the greenback's ability to hold above the psychologically and technically key 85 yen level lowered the risk of dollar/yen dropping to a 15-year low below the November trough at 84.82 yen, at least until the monthly U.S. jobs data, which is seen setting the dollar's near-term direction.
A decline beyond the November milestone could open the door for the greenback to decline to an all-time low below 80 JPY, hit 15 years ago, traders said.
Dealers are worried that a tumble to a 15-year low would finally prompt the Ministry of Finance into taking action on the currency's strength, which is hurting Japanese exports, shares and the export-dependent economy.
"Players feel they have sold the dollar a bit too much before the U.S. jobs data, and are buying back the currency a little," said a senior trader at a Japanese trust bank.
But the trader said the USD remained on a downward trend in the longer term, weighed by persistent speculation that the Federal Reserve may further relax its monetary policy to help the U.S. economic recovery which is feared to be losing steam.
Also, the dollar's growing role as a carry trade funding currency points to a further slide.
USD Index
The USD index .DXY edged up 0.1 percent to 80.983, putting it back above its 200-day moving average at 80.768. However, it still needs to overcome 81.650 to break the bear trend of the past seven weeks, and otherwise risks a fall to its April low of 80.031.
The EUR was down 0.1 percent from late U.S. trade at $1.3152 having slid from a three-month record of $1.3262 struck on Tuesday. Traders reported good support in the $1.3140/50 area and more at $1.3107.