Dollar slips in London

The struggling dollar slipped on Tuesday after a brief rally ran out of steam, while the euro recovered after a senior official said some European Central Bank emergency support may be withdrawn. Traders also ascribed the dollar's drop to reported comments from a former Chinese central bank adviser who said a devaluation of the US currency may be inevitable.
Against the yen, the dollar fell to its weakest since Japanese authorities stepped in to try and stem the currency's gains, sparking jitters they may intervene again. Many traders expect the greenback's downtrend to continue, on a view that any future quantitative easing (QE) by the Federal Reserve, even in a modest form, would probably still be more aggressive than moves by other central banks.
"The China comments gave euro/dollar its biggest impetus as it made people think perhaps there would be a reserve shift out of dollars," said Adrian Schmidt, currency strategist at Lloyds.
The euro was lifted back into positive territory by comments from ECB Executive Board member Juergen Stark, considered a hawk, that the ECB may not renew some of its support measures when they mature at year end. At 1203 GMT, the euro was up 0.1 percent at $1.3466, not far from a five-month peak of $1.3507 hit on Monday. The euro earlier dropped as low as $1.3382 on speculation Spain's ratings may be downgraded by Moody's.
The dollar index fell back towards a seven- month low of 79.19 hit on Monday, standing at 79.427. It has lost more than 4 percent this month as investors sold the greenback on the back of a slow US recovery. "The dollar's trend remains lower and investors will be looking to sell at better levels," said Paul Mackel, director of currency strategy at HSBC. The dollar fell as low as 84.05 yen on electronic trading platform EBS, traders said, its weakest since September 15, when Japan sold nearly 2 trillion yen for dollars.
Support is seen at that low of 84.05, which marks the 61.8 percent Fibonacci retracement of its rise in the hours before and after Tokyo's yen-selling intervention on September 15. Some traders expect more dollar selling by Japanese exporters before the end of Japan's fiscal first half on September 30. There are said to be some stop-loss orders around 83.90 yen. Analysts said a narrowing spread between US and Japanese two-year yields also kept downward pressure on dollar/yen, but anxiety Tokyo may intervene if the yen gets up towards 82 per dollar helped check gains.