* Dollar index near 15-mth low, eyes support at 75
* Euro resilient despite S&P's downgrade of Portugal
* Australian dollar dips, but near 29-year high vs dollar
* Dollar/yen steady, talk of offers above Y81.50
By Naomi Tajitsu and Masayuki Kitano
HONG KONG/SINGAPORE, March 25 (Reuters) - The dollar hovered
near a 15-month low against a basket of currencies and was in
sight of a 29-year trough against the Australian dollar as a
bounce in equities suggested that risk appetites were on the
mend.
The euro dipped to a session low $1.4150 after Standard &
Poor's downgraded Portugal's credit ratings and warned it could
cut it again, but it quickly recovered as further losses were
clipped by bids seen around $1.4140. []
Analysts said the broader picture was one of dollar weakness
on the back of a recovery in global equities and improving risk
sentiment, while the euro had become somewhat resilient to
ratings downgrades given that much of the euro zone's fiscal
woes has been priced into its value.
"The market is treating many of these downgrades as
rear-guard action which is already well discounted and the
dollar is under pressure broadly," said Todd Elmer, currency
strategist at Citi in Singapore.
"This will continue to support the euro even if we do see
some marginal negative news on the sovereign debt crisis."
In late Asian trade, the euro <EUR=> traded around $1.4180,
up slightly from late U.S. trade.
The single currency has rebounded after sliding to around
$1.4050 on Thursday. Traders suspected Asian sovereign names had
been buying the euro around that level.
The buying put back into view a 4 1/2-month high of $1.4249
hit earlier in the week, and analysts including Elmer at Citi
expected the euro to soon retest that level, and subsequently
$1.4283, a peak in early November.
European leaders agreed on Thursday to increase their
financial rescue fund to the full 440 billion euros by June, but
avoided discussing Portugal which is under pressure to seek a
bailout after its prime minister resigned. []
The euro has largely brushed off worries over the fiscal
woes of highly-indebted euro zone countries such as Portugal,
supported in part by market expectations that the European
Central Bank would raise interest rates as early as April,
boosting its yield advantage over the dollar.
In another sign of the dollar's broad weakness, the
Australian dollar hovered near its Dec. 31 peak around $1.0257
-- a level not seen since 1982. The Aussie dollar last stood at
$1.0220, up a touch from Thursday.
"With U.S. equities rising on solid earnings, it looks as if
risk appetite is improving," said a trader for a major Japanese
bank in Tokyo.
The dollar index, which measures the dollar's value against
a currency basket, was flat at 75.656 <.DXY>, but hovered near
75.340 hit earlier this week, its lowest since December 2009.
Traders said a breach of 75 could open way for a further fall.
JAPAN SEEN DEFENDING 80 YEN
Markets have settled after Japanese equities plunged last
week on worries over the economic toll from Japan's earthquake
and tsunami, while fears over a quake-crippled nuclear power
plant had spurred a bout of risk aversion.
Joint intervention by the Group of Seven industrialised
nations to sell the yen to contain its surge versus the dollar
and other currencies has stabilised the FX market.
The dollar held steady against the yen at 80.99 yen <JPY=>,
staying some ways above a record low of 76.25 yen hit last week.
Investors are bracing for the possibility of more
yen-selling intervention by Japan, while dollar selling interest
by Japanese exporters ahead of the financial year-end is likely
to temper gains in the U.S. currency.
Traders in Hong Kong cited slight dollar demand at 80.90 and
81.00 yen, while adding that selling demand was limited in Asian
trade. A trader for a major Japanese bank in Tokyo said there
were dollar offers at levels above 81.50 yen.
Market participants see Japan defending the dollar around 80
yen through the fiscal year-end, while analysts say Tokyo will
step in to curb yen strength around that level beyond March if
any yen appreciation is accompanied by erratic market movements.
Japan has said the aim of any intervention is to quell
market volatility. Last week's action achieved this, as the
dollar has been glued to the 81 yen region throughout this week
while implied volatility has dropped sharply <JPVOLS>.
"The fact that the market has calmed gives them less need to
intervene, but there's a good chance that if the dollar went
below 80 yen, volatility would pick up quite significantly, so
they would be justified in entering the market," said David
Forrester, currency strategist at Barclays Capital in Singapore.
He added that even an orderly break below 80 yen could
prompt Tokyo authorities to step in as a preemptive move to
avoid any jump in volatility.
Other analysts argued that last-minute yen buying by
corporates has ended while significant repatriation flows by big
Japanese investors have been more or less nonexistant in the
past week, suggesting few immediate reasons to buy the yen.
Japanese data confirmed the market's suspicion that domestic
investors were not big sellers of foreign assets in the week
after the earthquake; rather, they continued to buy, while
foreign buying of Japanese shares hit a record high. []
Koji Fukaya, currency strategist at Credit Suisse in Tokyo,
said that given such limited demand for the Japanese currency at
the moment, further yen strength would be unwarranted and would
likely prompting Japan and other countries to enter the market.
"Regardless of when it happens, I think a break under 80 yen
will see coordinated intervention," he said. "And the threat is
of coordinated action, rather than Japan acting on its own, so I
don't see a break under that level."
(Additional reporting by Hideyuki Sano in Tokyo; Editing by Kim
Coghill and Richard Borsuk)
