FOREX-Dollar slips vs yen; RBA rate decision awaited

Tue Dec 4, 2012 8:05am IST

Polluted waters of China

Polluted waters of China

Growing cities, overuse of fertilizers, and factory wastewater have degraded China's water supplies to the extent that half the nation's rivers and lakes are severely polluted.  Slideshow 

* Market expects RBA to cut a quarter point to 3 pct

* Euro down from 7-mth high vs yen overnight

By Lisa Twaronite

TOKYO, Dec 4 (Reuters) - The dollar slipped against the yen on Tuesday after U.S. manufacturing activity hit a three-year low in November, while the euro succumbed to profit-taking after hitting highs against both the dollar and the yen the previous day.

The Aussie was steady ahead of a Reserve Bank of Australia (RBA) policy decision at 0330 GMT. A Reuters poll of 23 analysts on Friday found 16 expected a cut.

Data released on Monday showed U.S. manufacturing activity surprisingly contracted in November, dropping to its lowest level in more than three years.

"The perceived strengthening of the U.S. economy was one factor pushing up the dollar in recent weeks," said Masashi Murata, senior forex strategist at Brown Brothers Harriman. "Ahead of Friday's U.S. nonfarm payrolls report, which could show that job growth is slowing, the dollar is easy to sell," he said.

Continuing concerns about the U.S. "fiscal cliff" also added to the perceived safe-haven appeal of the yen.

The White House dismissed a proposal from congressional Republicans on Monday to avert the $600 billion worth of tax increases and spending cuts, saying it did not meet President Barack Obama's pledge to raise taxes on the wealthiest Americans.

The dollar shed about 0.1 percent to trade at 82.13 yen after earlier dropping as low as 82.04 yen, moving further away from last month's high of 82.84 yen.

The yen's rise against the dollar also bolstered it against the euro, with some investors locking in gains after the European unit rise on Monday on positive news on Europe's debt crisis.

Spain formally requested European funds to recapitalize its banking sector, pushing down Spanish and Italian bond yields as investors became more confident about buying euro zone debt. Greek bonds rallied after the announcement of details of a debt buy-back.

Against the yen, the euro slipped about 0.2 percent to 107.15 yen, after rising to a seven-month high of 107.67 yen on Monday.

The euro last stood at $1.3052, steady from late U.S. levels on Monday, when it rose as high as $1.3076, its highest level since Oct. 22.

Against the U.S. dollar, the Aussie rose 0.1 percent to $1.0428, still well shy of last week's two-month high of $1.0491.

If the RBA trims its cash rate by a quarter point to 3 percent as expected, that will match the record lows touched during the global financial crisis in early 2009.

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