Dollar extends losses

The dollar gave back some of its gains against the yen and extended losses to hit a fresh five-week low against the euro in Asian trading on Thursday after a more dovish-than-expected outcome to the Federal Reserve's latest meeting pressured it overnight.
Fed Chairman Ben Bernanke said the US central bank might consider further monetary easing through bond purchases. The Fed also pushed back the likely timing of an eventual interest rate hike until late 2014, 18 months later than its previous expectations.
The greenback slipped to 77.63 yen, following its overnight rise to a two-month high of 78.28 yen on the EBS trading platform. "After the Fed, the dollar will have a harder time continuing this week's gains against the yen. The topside has gotten heavy," said Teppei Ino, currency analyst at Bank of Tokyo-Mitsubishi UFJ.
Strong technical resistance was cited around 78.30 yen, with the 200-day moving average now at 78.33 yen. The 61.8 percent retracement of the pair's October-January fall also lies at 78.31 yen, while support is seen at the long term trendline at 77.53 yen.
Japanese life insurers, which normally reduce their holdings of riskier assets and bolster holdings of yen bonds before the end of the business year on March 31, are likely to keep the dollar well off the 80-yen mark at least until then, said a senior spot trader for a major Japanese bank in Tokyo.
The dollar index eased to a five-week low of 79.357 before steadying at 79.392. The euro rose to a five-week peak of $1.3127, and last bought $1.3117. While the single currency's climb has led many investors to cut back what had been significant short positions, some of these positions remain, leaving it vulnerable to short squeezes even as concerns about Europe's debt situation remain.
The euro changed hands at 101.83 yen, just shy of a fresh one-month high of 101.97 yen hit in early Asian trade, and moving further away from an 11-year low of 97.04 yen marked on January 16. Japanese exporters have set their euro rate targets at 105 yen, so many traders believe selling pressure will intensify ahead of that level. Both the Australian dollar and its New Zealand counterpart retreated after touching their highest levels since October 31.
With Australian markets closed for a holiday on Thursday, the Aussie bought $1.0626 after rising as far as $1.6039 in thin trading conditions, its highest level since October 31. With a test of the September and October highs in the 1.0750/65 area now possible, the weekly Ichimoku cloud top at $1.0561 could offer an entry point, according to a technical analyst.