Euro steady, clings to Thursday's gains
* BOJ keeps policy on hold as expected
* Dollar/yen bids seen near Y81.30, offers above Y81.80
By Masayuki Kitano
TOKYO, May 20 (Reuters) - The euro held steady against the dollar on Friday, clinging to much of the gains it made the previous day after weak U.S. data underscored expectations that the Federal Reserve will keep interest rates near zero for a while.
The dollar struggled to regain ground after taking a hit on Thursday from data showing a slowdown in manufacturing growth in the U.S. Mid-Atlantic region and an unexpected fall in existing home sales in April. [ID:nN19134058]
Lingering concerns about the possibility of debt restructuring in Greece, however, were expected to temper any gains in the euro against the dollar.
"This is probably a temporary rebound (in the euro). I personally think it wouldn't be a surprise if the euro were to head down towards below $1.40," said Daisuke Karakama, a market economist at Mizuho Corporate Bank in Tokyo.
"It is not as if fresh measures have been offered for Greece or that anything has been officially decided. I think the euro could come under pressure next month because of this same problem," Karakama said.
The euro held steady at $1.4310, , staying above a seven-week low of $1.4048 marked on trading platform EBS earlier this week.
The euro has dropped around 4 percent since hitting a peak near $1.4940 in early May, as a rout in commodities such as silver and oil LCOc1 spooked investors, prompting the unwinding of dollar-funded bets in risky assets.
Worries that Greece may restructure its debt have also helped drag the euro lower this month, although the single currency regained some ground this week, after euro zone finance ministers approved an emergency loan programme for Portugal.
COMMODITY STABILISATION
Signs of an easing in risk reduction among investors, with commodities having regained some stability this week after their sharp sell-off earlier in May, have also supported the euro and commodities-related currencies such as the Australian dollar.
"The commodity stabilisation ... should encourage risk taking in foreign exchange," said Rob Ryan, FX strategist at BNP Paribas in Singapore. "But this is still somewhat lacklustre -- like we are waiting for some green light to take risk."
The euro was steady against the yen at 116.87 yen , having rebounded since hitting a two-month low near 113.40 yen on Monday.
The dollar inched higher against the yen, rising 0.1 percent to 81.67 yen , edging back towards a three-week high around 82.23 yen hit the previous day.
There was talk of dollar bids from Japanese retail traders near 81.30 yen, while some offers from such household investors were said to be lurking at 81.80 yen and above.
The Bank of Japan kept monetary policy unchanged and held interest rates steady in a range of zero to 0.1 percent on Friday as widely expected.
In surprise move, Deputy Governor Kiyohiko Nishimura dropped his proposal to loosen policy further with an expansion of the central bank's asset-buying scheme. He made such a proposal last month but was voted down by an 8-to-1 margin.
The yen showed little reaction to the BOJ decision, with some analysts saying that the possibility of the BOJ expanding its asset buying scheme in coming months could not be ruled out. [ID:nL4E7GK04E]
The yen has been pressured this week by speculation about the potential for yen-selling flows related to Japanese corporate acquisitions of overseas firms, including drug maker Takeda Pharmaceutical's deal to buy Swiss-based Nycomed for 9.6 billion euros ($13.7 billion). [ID:nL4E7GJ0XB] (Additional reporting by Chikafumi Hodo and Yoko Matsudaira; Editing by Chris Gallagher)
copied from http://uk.reuters.com/article/2011/05/20/markets-forex-idUKL4E7GK0E220110520
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