* Dollar near 1-month highs, oil rebound limits gains
* Surprise ADP rise stirs hopes for upbeat US payrolls
* Aussie dips on poor retail sales data, RBA rate cuts seen
* Japanese steady foreign bond, Aussie, kiwi buyers
By Eric Burroughs
TOKYO, July 31 (Reuters) - The dollar held near one-month
highs against the euro and yen on Thursday after a boost the
previous day from unexpected employment gains that raised hopes
the U.S. economy may not deteriorate further.
The dollar's gains were kept in check as oil prices snapped a
losing streak, which has bolstered the U.S. currency on hopes
that the 10 percent slide in crude prices this month would take
some of the pressure off the struggling economy. []
Many investors stuck to the sidelines before a slew of U.S.
economic data over the next few days, including a monthly
payrolls report on Friday, which will test expectations the
Federal Reserve may lift interest rates later in the year.
The dollar's fortunes have started to turn up as the euro
zone, Japan, Australia and many other economies show clear signs
of losing steam nearly a year after the credit crunch first
erupted. Australian retail sales suffered their biggest drop in
six years in June. []
"The dollar is the winner in what's becoming an ugly
contest," said Masafumi Yamamoto, head of forex strategy for
Japan at Royal Bank of Scotland.
"I'm not bullish on the dollar, the market still expects too
much tightening by year-end. But it may gain and will not fall
substantially."
The dollar dipped 0.1 percent from late U.S. trade to 107.97
yen <JPY=>, holding near a one-month peak of 108.34 yen struck
the previous day.
The single European currency slipped 0.1 percent to 168.23
yen <EURJPY=R> but was near a record peak just below 170 yen.
The euro <EUR=> was flat at $1.5580 after dropping as far as
$1.5522 on trading platform EBS on Wednesday, a one-month low.
The ADP employment report, a private sector gauge of labour
market trends, showed a surprising 9,000 increase in jobs in
July, much better than an expected 60,000 drop. []
But analysts warned that the ADP figures have a spotty record
in predicting how the outcome of the government jobs report,
which has showed companies cutting workers every month this year.
"The correlation between employment reports from the ADP and
the U.S. government has not been that strong lately," Shuichi
Kanehira, a senior forex trader at Mizuho Corporate Bank.
"Investors should not be so bullish about the dollar until
they see the Labor Department's jobs data, as well as today's GDP
data."
The payrolls report is viewed as key because Fed officials
have indicated their discomfort with a pick-up in inflation
pressures, but persistent job losses make it difficult for the
Fed to consider lifting rates from 2 percent.
Thursday's reports will feature the U.S. economy's overall
performance for the second quarter, as well as the Chicago PMI
reading on Midwest business activity.
The expansion of emergency lending facilities by the Fed, ECB
and Swiss National Bank also briefly helped the dollar, showing
that top central banks were seeking to keep money flowing through
strained money markets and prevent a renewed downturn.
YEN AND AUSSIE STRUGGLE
The yen has been hurt by expectations the Bank of Japan will
keep rates on hold at 0.5 percent for several months as the
economy has stalled, and as Japanese investors have shifted funds
abroad to get better returns.
Japanese investors were buyers of foreign bonds for four of
the past five weeks, with purchases over that period totalling
1.08 trillion yen ($10 billion), data from the Ministry of
Finance showed on Thursday. []
The pick-up in foreign bond buying comes as traders in Tokyo
have cited persistent Japanese mutual fund buying of foreign
currencies in the past few weeks. Fourteen new mutual funds were
launched on Thursday, with some targetting foreign assets
The Australian dollar <AUD=> was little changed at $0.9440
<AUD=D4>, shaking off a brief dip after the retail sales report
stoked expectations that the central bank could start cutting
interest rates, with two quarter-point hikes priced in over the
next year.
But while the high-yielding Aussie and New Zealand dollar
have retreated against the dollar, their drop against the yen has
been limited because Japanese investors and currency traders have
been keen to buy.
Currency traders on the Tokyo Financial Exchange, who make
leveraged bets with borrowed funds, have boosted their bets in
favour of the kiwi and Aussie to a record high.
(Additional reporting by Rika Otsuka; Editing by Rodney Joyce)
