TOKYO (AFX-ASIA) - The euro eased slightly in midmorning after
European Central Bank M3 money supply data overnight suggested the ECB
has less room for an interest rate cut to help boost growth, dealers
said.
However, overall, major currencies remained tightly held ahead of
the release of US GDP data tonight, given renewed concerns over the US
economy and the government's commitment to its strong-dollar policy.
Commerzbank head of foreign exchange Ryohei Muramatsu said
tonight's US GDP data will be very important for the dollar, although
he expects that even a stronger-than-consensus number would fail to
lift the currency.
Market consensus is for second quarter GDP growth of 0.9 pct.
Muramatsu said investors remain nervous about increasing their
dollar holdings, given uncertainty over the outlook for the economy and
the continuation of the US administration's strong-dollar policy.
"America is worried about the economy and the strong dollar, which
is a significant change from recent weeks," he said.
"It's not that the European economy has improved, it's that the US
has gained more attention. The market was only looking at one tree, not
the forest. Now, I think, this is a turning point," he said.
In fact, the euro weakened on expectations the
greater-than-expected money supply growth data released overnight may
constrain the ECB's ability to ease monetary policy.
"They may not cut rates because of M3," Muramatsu said.
He added that Japan's Upper House election on Sunday will provide
few surprises. "No one is talking about the election. The LDP win has
been discounted."