| GEO Business | Dollar down, euro heads up towards $1.40 | Updated at: 1208 PST, Wednesday, October 13, 2010
 TOKYO: The dollar came under broad selling pressure on Wednesday as investors sold it down in a bid to test key lows against the euro, the Swiss franc and a basket of currencies.
The euro looked set for a challenge of $1.40, with eyes on its eight-month high at $1.4030, after Federal Reserve minutes the day before reinforced expectations of more quantitative easing.
But traders were cautious that uptrends against the dollar, which revisited a record low against the Swiss franc, were becoming stretched and the time for consolidation could be near.
Dealers said hawkish comments from European Central Bank Governing Council member Axel Weber on Tuesday, which highlighted the difference in direction between Fed and ECB policy, gave the euro added lift, with talk of a big stop-loss buy order just below $1.40.
But they cautioned that euro zone policymakers were likely to be increasingly unhappy if the euro rose above $1.40 EUR=.
"There's a psychological resistance at around $1.40 as (Eurogroup Chairman Jean-Claude) Juncker has said he was not happy with the euro reaching that level," a Japanese bank trader said.
"Still, it's hard to go long on the dollar when it's so obvious that the United States wants a weaker dollar."
The euro rose 0.3 percent to $1.3965, triggering stop-loss orders around $1.3950-60 before running into selling at $1.3970-90. Resistance was expected at $1.3985, Friday's session high, with talk of more stop-losses lined up above that level.
Its $1.4030 high is seen as the target to beat if it is to push higher rather than correct downwards. On the downside, its 200-week moving average sits at $1.3926.
It gained across the board, climbing against the yen and sterling and the Swiss franc.
Robert Ryan, currency strategist at BNP Paribas in Singapore, said even though the U.S. quantitative easing theme was starting to look overpriced, the risk was that reserve management by Asian central banks could keep the euro going.
"As long as the market continues to see the BOJ, the BOE and the Fed pumping liquidity in, it's going to go into emerging markets and emerging markets are going to pump it back into the euro," Ryan said. |  | |
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