By Hideyuki Sano
TOKYO, April 26 (Reuters) - The euro slipped on Tuesday after European Central Bank Governor Jean-Claude Trichet said he shares the view that a strong dollar is in the interest of United States, a comment taken by some market players as showing frustration over the dollar's relentless fall and also an attempt to talk up the currency.
Trichet also told two Finnish newspapers he does not see any significant second-round inflation, prompting traders to dump euro long positions against the dollar, although many traders think the dollar will remain under pressure from a perception that the U.S. central bank is far more reluctant to tighten its policy. [ID:nEBE7DA00T]
"I don't take it lightly that Trichet is talking about the dollar rather than the euro. European policy-makers became alarmed when the euro rose above $1.45 in 2007 and they started to rein in the dollar's fall," said Minori Uchida, a senior analyst at the Bank of Tokyo-Mitsubishi UFJ, adding that the world's policy-makers are increasingly worried about the dollar's fall.
"In the Group of Seven (G7) statement right after the dollar index hit a record low in March 2008, the G7 said it was concerned about currency moves. The U.S doesn't necessarily want to cheapen the dollar against the euro and the yen. Its target is China. So I wouldn't be surprised if there were international moves (to stem the dollar's fall)," he added.
The euro
Data from U.S. Commodity Futures Trading Commission showed speculators' long position in the currency was still near a three-year high on the Chicago futures exchange. Their net euro long position was 62,195 contracts last week, not far from a three-year high of 64,985 contracts hit in the preceding week. [ID:nN25194222]
Against the yen the dollar slipped to a four-week low of 81.56 yen
Short-term players who had bought the dollar on hopes of month-end buying by Japanese investors were also forced to close their long positions in Tuesday trade, a Japanese bank trader said.
But as the dollar was bought back broadly, the dollar's index against a basket of six major currencies <.DXY> rose about 0.3 percent on the day to 74.23, pulling away from a 3-year low of 73.735 hit last week.
Despite the dollar's gain on Tuesday, many market players think the U.S. currency will remain fragile given the perception that the Federal Reserve will be in no rush to unwind its easy monetary policy.
The Fed is expected to say it will stick to its plan to complete a $600 billion bond-buying programme in June at its two-day policy meeting starting on Tuesday, with the focus on the post-meeting news conference by Fed Chairman Ben Bernanke on Wednesday -- the first regularly scheduled news briefing by a Fed chief in the U.S. central bank's 97-year history.
Many traders expect Bernanke to avoid dropping any hints of an immediate plan to tighten the bank's policy.
"I think the rough consensus in the market is that Bernanke will not say anything surprising, which will give the market a fresh impetus to sell the dollar," said a trader at a Japanese bank. (Editing by Michael Watson)