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Dollar lower vs. yen as Portugal uncertainty weighs

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Shutterstock photo - The dollar fell to session lows against the yen on Wednesday as concerns over an escalating political crisis in Portugal bolstered safe haven demand.

During European late morning trade, the dollar turned lower against the yen, with USD/JPY dropping 0.75% to 99.86.

Market sentiment was hit by reports that more Portuguese government ministers may resign, after the country's finance minister and foreign minister dramatically stepped down this week amid public opposition to austerity measures.

The yield on Portuguese 10-year bonds hit 8% on Wednesday, up from 6.51% on Tuesday.

Meanwhile, the euro pulled back from five-week lows against the dollar, with EUR/USD down 0.10% to 1.2965, after falling as low as 1.2924.

The single currency found support after official data showed that euro zone retail sales rose 1% in May, outstripping expectations for a 0.2% gain.

Investors remained cautious ahead of Thursday's European Central Bank policy meeting. ECB President Mario Draghi was expected to reiterate that an exit from loose monetary policy remains distant.

Demand for the dollar continued to be underpinned after economic data releases earlier in the week underlined the view that the stronger U.S. economy will see the Federal Reserve start to taper asset purchases later this year.

Investors were looking ahead to Friday's U.S. nonfarm payrolls data, for further clues on when the Fed may decide to unwind its USD85 billion-a-month stimulus program.

Elsewhere, the dollar fell to session lows against the pound, with GBP/USD up 0.66% to 1.5254 after data showed that service sector activity in the U.K. expanded at the fastest pace since March 2011 in June.

Markit said the U.K. services purchasing managers index rose to a 27-month high of 56.9 in June from 54.9 in May, compared to expectations for a decline to 54.5.

The data boosted the outlook for second quarter growth and lowered the chances for additional easing measures by the Bank of England at its monthly policy meeting on Thursday.

The dollar edged lower against the Swiss franc, with USD/CHF slipping 0.06% to 0.9499.

The greenback was mixed to higher against its Australian, New Zealand and Canadian counterparts, with AUD/USD down 0.82% to hit three-year lows of 0.9071, NZD/USD dipping 0.01% to 0.7747and USD/CAD edging down 0.08% to 1.0535.

The Aussie weakened after Reserve Bank Governor Glenn Stevens said the board "deliberated for a very long time" on Tuesday before deciding to keep its key interest rate unchanged at a record low 2.75%, signaling the possibility of further rate cuts in the coming months.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.17% to 83.66.

The U.S. was to release the ADP report on nonfarm payrolls later Wednesday, as well as the weekly government report on initial jobless claims and data on the trade balance. In addition, the ISM was to produce a report on U.S. service sector activity. - offers an extensive set of professional tools for the Forex, Commodities, Futures and the Stock Market including real-time data streaming, a comprehensive economic calendar, as well as financial news and technical & fundamental analysis by in-house experts.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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