* Dollar extends gains vs yen as US yields rise
* Stop-loss buying lifts dollar to 1-mth high vs yen
* More U.S. data coming later on Thursday
By Masayuki Kitano
SINGAPORE, Aug 16 (Reuters) - The dollar surged to a one-month high against
the yen on Thursday, extending gains after this week's upbeat U.S. data gave a
boost to Treasury yields and cooled expectations of monetary easing by the
Federal Reserve.
The dollar climbed on stop-loss buying, adding to a rally that began earlier
in the week after strong retail sales data bolstered the view that a recent
slowdown in U.S. growth will prove temporary.
The greenback touched a high of 79.35 yen on trading platform EBS, its
highest level since mid-July. The dollar last changed hands at 79.34 yen, up 0.5
percent from late U.S. trade on Wednesday.
"We are seeing increasing signs of stabilisation in the U.S.," said Callum
Henderson, global head of FX research for Standard Chartered Bank in
Singapore.
"The U.S. improvement is in contrast to the persistent weakness elsewhere. So
that's dollar positive because (interest) rate spreads move in favour of the
dollar," he said, adding that the dollar may rise towards 80 yen in the short
term.
Data on Wednesday showed that U.S. industrial output rose in July, while
home-builder sentiment in August hit its highest level in more than five
years.
Such data came in the wake of a surprisingly strong reading on U.S. retail
sales that dampened expectations the Fed will launch another round of
bond-buying, or quantitative easing, as early as September.
Analysts warned, however, that the dollar's rise versus the yen could lose
steam if coming U.S. indicators disappoint, and a U.S.-based currency trader
said it was hard to tell whether the dollar's rise marked the start of a
medium-term trend or a "big head fake", especially since the rally has taken
place in thin, summertime market conditions.
EVENT RISK IN SEPTEMBER
Not all of the data released on Wednesday was rosy, with a gauge of
manufacturing in New York state showing a contraction in August for the first
time since October 2011.
"It's too early to celebrate with both hands in the air," said Daisuke
Karakama, market economist for Mizuho Corporate Bank in Tokyo.
The weak reading on manufacturing in New York state came ahead of the
Philadelphia Fed's gauge of factory activity in the mid-Atlantic region, due
later on Thursday.
"I think corporate sentiment provides the best gauge of current conditions...
You have to think about what might happen if the Philly Fed index turns out to
be weak. That could change the trend again," Karakama said.
In any event, the dollar will find it tough to break above the 79.50 yen to
80.00 yen region unless there is another strong catalyst, given the potential
for dollar-selling by Japanese exporters at such levels, Karakama
added.
The euro eased 0.1 percent to $1.2282, with moves subdued as investors await
details on a new European Central Bank programme to help reduce the borrowing
costs of Spain and Italy that
the central bank is now considering.
"Euro/dollar is in a range for now but we still expect it to move lower in
September on the prospect of more headlines out of Europe, a lot of event risk
in September, and rate cuts as well," said Henderson at Standard
Chartered.
"Our forecast for euro/dollar is $1.18 by the end of the quarter," he
added.
A Reuters poll in early August showed that the ECB is seen likely to begin
purchasing Italian and Spanish bonds in September, and to also cut its main
refinancing rate to a record low of half a percent at that time.
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