* Euro hits 14-mth high vs dollar in quiet trade
* Sterling rises after Friday's losses, but outlook grim
* China should increase EUR, JPY holdings - Chinese report
* BoC's Carney repeats concern on Canada dollar strength (Recasts, updates prices, adds comment, BoC statement, changes byline, dateline, previous LONDON)
By Gertrude Chavez-Dreyfuss
NEW YORK, Oct 26 (Reuters) - The dollar weakened on Monday in generally quiet trading, hitting a 14-month low against the euro, as gains in stocks and growing evidence of a global recovery reduced safe-haven demand for the U.S. currency.
A Chinese report saying Beijing should increase its holdings of euros and yen in its foreign reserves also prompted investors to sell the dollar, but the selling has since tapered off.
"This is all a continuation of the last week's dollar selling. There has really been no news to drive today's markets, but we're continuing to see gains in equities pressuring the dollar," said Camilla Sutton, senior currency strategist, at Scotia Capital in Toronto.
Meanwhile, the story out of China was an opinion piece in the Financial News, a paper published by the People's Bank of China, which said the dollar should remain the principal currency in China's foreign exchange reserves but that the share of euros and yen should increase. [ID:nPEK285229]
Scotia's Sutton said the Chinese report was nothing new and the impact was pretty much short-lived. "The official who made comment was not even senior and everyone knows it takes time to diversify out of the U.S. dollar because there really is no alternative."
In early New York trading, the euro was up 0.1 percent at
$1.5016
The ICE Futures dollar index <.DXY>, a gauge of the greenback's performance against six other major currencies, was down 0.1 percent at 75.401, moving back towards a 14-month low of 74.940 touched last week.
But analysts expressed concern there may be limited scope for further dollar selling, given that investors are already very short of dollars.
Data on Friday showed currency speculators increased bets against the U.S. dollar, with the value of the dollar's net short position rising to $18.65 billion in the week ending Oct 20 from a $17.99 billion net short the prior week. [ID:nN23573397]
"The issue of reserve diversification has been an ongoing topic for quite a while, while the other reason the dollar is not selling off more sharply is that the market is already very short dollars and there is only a certain extent that people want to be short," said Michael Klawitter, senior currency strategist at Commerzbank in Frankfurt.
Against the yen, the dollar fell 0.1 percent to 91.95 yen
Sterling
In Canada, central bank governor Mark Carney repeated
concerns about the adverse impact of a strong currency on its
economy. See [ID:nBAC002343]. The U.S. dollar was 0.4 percent
higher versus the Canadian dollar to C$1.0571
The New Zealand dollar, meanwhile, underperformed, down 0.1
percent on the day at US$0.7532
Monday is a quiet day for economic data and focus is likely to center on events later in the week, including U.S. gross domestic product data for the third quarter and interest rate decisions in Norway and New Zealand.
Figures earlier on Monday unexpectedly revealed German consumer sentiment declined for the first time in just over a year going into November. [ID:nLN478719] (Additional reporting by Jessica Mortimer in London; Editing by Chizu Nomiyama)