* U.S. dollar supported by upbeat economic data
* Correction in commodity prices further weighs on Aussie
* Stop-loss selling also pulls Aussie lower -trader
* Emerging market growth to sustain commodity uptrend-analyst
By Ian Chua and Masayuki Kitano
SYDNEY/SINGAPORE, Jan 5 (Reuters) - The dollar held firm on
Wednesday, bolstered by further evidence that the U.S. economic
recovery is becoming self-sustaining, while a correction in
high-flying commodity prices pressured the Australian dollar.
Market players said the dollar's rise and a drop in
commodities this week was driven by position unwinding, with
investors trimming back some of the bets made before the
year-end.
"The move over the past two weeks was somewhat exaggerated,
having taken place in thin liquidity. With liquidity now coming
back on stream, the markets are now reassessing some of the
moves," said Sue Trinh, strategist at RBC Capital Markets.
"Hence we've seen a bit of paring back of U.S. dollar losses.
The same goes for commodity prices as well, they've extended
themselves very much over the holiday period, so a little bit of
consolidation is to be expected," Trinh said.
The dollar index, which measures the greenback's value
against major currencies, edged up 0.2 percent to 79.586 <.DXY>.
The index is up 0.6 percent this week, regaining some ground
after sliding 1.8 percent last week.
A recent series of economic data has raised hopes for a
sustainable U.S. recovery and lent support to the dollar. The
latest such data on Tuesday showed new orders received by U.S.
factories rose unexpectedly in November.
Since the market has priced in positive readings in U.S.
economic data this week, including Friday's key jobs data, there
is a possibility the market will be swayed more by
weaker-than-expected numbers, some traders said. []
The euro dipped 0.3 percent to $1.3272 <EUR=> and the dollar
held steady against the yen at 82.08 yen <JPY=>.
AUSSIE SHAKY
Ayako Sera, market strategist at Sumitomo Trust & Banking in
Tokyo, warned against reading too much into the previous day's
slide in commodities.
"As long as economic growth in emerging countries stays firm,
especially in China, commodities will likely stay on an upward
trend. But there will surely be some profit-taking from time to
time if prices go too high," Sera said.
The Australian dollar slipped 0.3 percent to $1.0020
<AUD=D4>, extending its losses after shedding 1.2 percent the
previous day, when gold <XAU=> and oil <CLc1> both fell more than
2 percent.
A trader for a European bank in Singapore said stop-loss
selling weighed on the Australian dollar on Wednesday, with talk
of more stops all the way down toward parity. Another trader said
there were some bids for the Aussie just below parity.
The Australian currency has taken a hit this week as
investors fear that widespread floods in the country's northeast
will hit production of coal, the nation's biggest export.
A year-end rally in thin trade had driven the Aussie to a
28-year high around $1.0257 last Friday, pushing the relative
strength index (RSI) towards overbought territory and setting the
scene for a consolidation in the short term.
Concerns about the impact of the Australian floods are likely
to continue to pressure the currency, especially against other
commodity-linked currencies such as the Canadian dollar, said
David Forrester, FX strategist at Barclays Capital in Singapore.
"Our equity analysts think that a lot of the coal mines in
Queensland could be shut down for two to three months. So that's
going to be a substantial hit to exports going forward," he said.
Over the next three months, the Australian dollar is likely
to retreat to around $0.99, on the back of a stronger U.S.
dollar, Forrester said.
"We still think we may have more problems out of Europe to
come yet. In particular we think that Portugal may need
assistance, so that will lead to a stronger dollar," he said.
(Additional reporting by Kaori Kaneko in Tokyo, Reuters FX
analyst Rick Lloyd in Singapore; Editing by Tomasz Janowski and
Edmund Klamann)
