FOREX-Dollar softens as traders look to ECB policy meeting

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* Traders wary ahead of central bank meetings

* Euro, yen gain in light trading

* Aussie dips after rise

(Adds late prices)

By Michael Connor

NEW YORK, May 30 (Reuters) – The dollar retreated from
recent highs against other major currencies and closed lower on
Friday as traders braced for potentially market-moving meetings
next week by the European Central Bank and other monetary

The dollar, as tracked by the U.S. dollar index of a
half dozen currency pairs, was last off 0.18 percent at 80.353.
Earlier this week, the index was at highs not seen since early

Volumes were light as currency traders tidied up books at
the end of the month, according to Lane Newman, director of
foreign exchange at ING Capital Markets in New York.

The euro, which has lost 1.65 percent against the dollar
during May, was also up on the day, 0.26 percent to $1.3637,
after touching a daily low of $1.3599.

“There’s caution ahead of the event risk coming in the form
of the central bank meetings. With May ending, that will likely
make for low volatility today,” said Shaun Osborne, chief
foreign exchange strategist at TD Securities in Toronto.

Attention in currency and other global markets is now firmly
focused on next week’s European Central Bank meeting, which is
expected to deliver more policy easing.

It comes as conviction has been shaken that the Bank of
Japan would also take more action this summer, underpinning a
rise for the yen to almost four-month highs against the euro.
The euro last stood at 138.76 yen, up 0.23 percent.

Likewise, while the dollar has gained earlier this week,
U.S. Treasury yields have fallen, and dealers said there was
talk of some substantial fund option bets on the yen
strengthening to as little as 98 per dollar over the next month.

On Friday, the dollar traded at 101.75 yen, down 0.04
percent for the day.

The euro has fallen almost 3 percent against the dollar in
just the past three weeks, hammered by expectations that the ECB
will deliver a substantial blow by pumping more cash into the
euro zone economy and lower market interest rates.

That euro move has left the market looking divided, however,
on whether the single currency can fall further, whatever the
ECB does next week.

Policymakers at central banks in Australia, Canada and
Britain also meet next week, and America’s sometimes
market-rattling monthly employment data will be published on
June 6.

The Australian dollar, this week’s biggest gainer among the
major currency pairs, on Friday bumped up against resistance
around $0.9320 and last traded off 0.05 percent at $0.9302.

(Additional Reporting By Patrick Graham in London; Editing by
Nick Zieminski)

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