FOREX-Dollar scales 16-month highs on cautious BOJ, weak China data
* Graphic: World FX rates in 2018 By Saikat Chatterjee
LONDON, Oct 31 (Reuters) - The dollar rose to its highestlevels in more than a year on Wednesday as dovish comments bythe Bank of Japan and weak data from China reinforced thegreenback's attractiveness as an investment destination.
Fuelled by an overnight rally in equities - Japanese stocks are up more than 2 percent - the dollarwas set for a seventh consecutive month of gains.
"Eurozone growth figures have been disappointing and theBank of Japan is striking a dovish stance at a policy meetingtoday so there is more room for the dollar to gain from currentlevels," said Paul Bednarczyk, director of G10 FX at ContinuumEconomics based in London.
Against a basket of its rivals, the dollar rose to 97.07 inAsian trade, its highest since June 2017 and up ten percent fromits February lows. It is holding firm against the euro at $1.1356.
It has risen for seven consecutive months as the twinpowerful forces of risk aversion in emerging markets and thegrowing divergence of the strength of the U.S. economy relativeto its global peers, especially Europe, has forced investors tobuy the dollar.
The euro zone economy grew less than expected in the thirdquarter, putting pressure on the European Central Bank as itmoves towards ending its asset purchase program in December.Meanwhile U.S. consumer confidence rose to an 18-year high inOctober. and Political uncertainty in Germany, following chancellorAngela Merkel's decision to step down in 2021, is alsopressuring the single currency. Moreover, the stand-off betweenRome and Brussels over Italy's free spending budget, which is inbreach of the European Union's fiscal rules, has weighed on theeuro.
Philip Wee, currency strategist at DBS, said in a note toclients that the gloomy backdrop might push the euro down to$1.12 in the current quarter, and is tipping an even lower$1.05-1.10 range in the first half of 2019.
At a policy decision on Wednesday, the Bank of Japan keptmonetary policy steady and slightly trimmed its inflationforecasts as global trade frictions clouded the economicoutlook, reinforcing views that the central bank is in no rushto trim its massive stimulus. Sterling held near its mid-August lows, hovering at$1.2705, after credit ratings agency Standard & Poor's said a'no-deal' Brexit would be likely to tip Britain into a recessionon Tuesday. China's official PMI - which gives global investors theirfirst look at business conditions in China at the start of thelast quarter of the year - fell to 50.2 in October, the lowestsince July 2016 and down from 50.8 in September.
(Reporting by Saikat Chatterjee; Additional reporting by VatsalSrivastava in SINGAPORE; Editing by Andrew Heavens)
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