* Dollar retains gains from Tuesday's rally
* Greenback gains limited, Japan exporter selling eyed
* NZ dollar falls, Hanover Finance halts payments
* Market players watching U.S. housing data
By Shinichi Saoshiro
TOKYO, July 23 (Reuters) - The dollar stayed firm on
Wednesday, holding much of the ground gained against the euro and
yen the previous day on a verbal lift from top U.S. officials and
a sharp slide in the price of crude oil.
Philadelphia Federal Reserve President Charles Plosser said
on Tuesday that rising inflation could force the Fed to start
raising rates even before labour and financial markets recover,
giving a big lift to the dollar. []
The dollar received more support after U.S. Treasury
Secretary Hank Paulson said on Tuesday a strong dollar is "really
very important".
"The dollar broke through some key levels and has upside
momentum," said Motonari Ogawa, director of forex trading at
Barclays Bank in Tokyo.
The dollar was little changed at 107.28 yen <JPY=>, with
gains limited in Asian trade by selling by Japanese exporters
repatriating funds.
After Tuesday's jump, the dollar finished above its 200-day
moving average against the yen for the first time in a year,
which analysts consider a strong positive technical signal.
The euro was steady at $1.5785 <EUR=>, having fallen nearly 1
percent the previous day.
The euro barely budged against the yen at 169.30 <EURJPY=R>,
not far from a record high of 169.91 yen hit on Monday.
New Zealand finance company Hanover Finance said it was
suspending repayments of existing loans and and interest, which
pushed the New Zealand dollar lower against the dollar.
[]
But the fall in the kiwi was likely to be contained with
investors unsure if the country's central bank would cut interest
rates or keep them on hold at its policy meeting on Thursday.
The kiwi fell 0.5 percent against the dollar to $0.7546
<NZD=D4> and tumbled 0.6 percent against the yen to 80.96 yen
<NZDJPY=R>.
DOLLAR DOUBTS REMAIN
Traders were wary of pushing the dollar too high ahead of
U.S. housing-related data later in the week, fearing that long
positions on the greenback would be at risk should the numbers
disappoint and thus knock the wind out of U.S. stocks.
Figures for U.S. existing home sales will be released on
Thursday and new home sales data will be out on Friday.
Also of interest among market watchers is whether Plosser's
hawkish stance on monetary policy is an isolated one, or if it
will resonate with other Fed Board members.
Fed documents released on Tuesday showed that Kansas City Fed
President Thomas Hoenig and Dallas Fed President Richard Fisher
sought a quarter percentage point rate hike in June to stem
inflation. []
In particular, Fed Board member Frederic Mishkin and Vice
Chairman Donald Kohn's appearance at a Bank of Canada economic
conference in Ottawa later on Wednesday is being carefully
watched.
"Though inflation is a shared concern, Plosser, a known hawk,
is still in the minority among his peers as others want to see
the credit crisis resolved first, and raising rates is not viable
under such a priority," said Masafumi Yamamoto, head of forex
strategy for Japan at Royal Bank of Scotland.
Kohn may present a more balanced monetary policy view on
Wednesday and his comments could push the dollar down, given that
the fraility of the economy and the financial sector remain key
U.S. themes, Yamamoto said.
The Australian dollar rose briefly after numbers released on
Wednesday showed core inflation in Australia accelerating to its
fastest annual pace in almost 17 years during the second quarter.
Analysts said the numbers did not change view that the
central bank considers that monetary policy is tight enough to
ensure a slowdown in domestic demand and so restrain inflation
over time. []
The Aussie hit a high of $0.9739 on the Reuters trading
system before falling to $0.9692 <AUD=D4>, dipping 0.2 percent on
the day and dragged down by the kiwi's fall.
(Additional reporting by Satomi Noguchi; Editing by Edwina
Gibbs)
