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FOREX-Dlr up but whipped around by China comments

Published 01/11/2010, 11:34 PM
Updated 01/11/2010, 11:36 PM

* Dlr at bottom, yen still to drop - China fund official

* But dlr cuts gains as the official says views are personal

By Satomi Noguchi

TOKYO, Jan 12 (Reuters) - The dollar jumped against the yen and the euro on Tuesday after an official from China's sovereign wealth fund said the U.S. currency has hit bottom.

But the greenback quickly reversed those gains after the official said the comments were only his personal view, prompting some investors to drop the currency.

"The market was completely taken aback by the comments from the Chinese official," said a trader for a U.S. bank, adding that this indicated how sensitive market players have become to Chinese policy movements.

The dollar made up earlier losses against the yen and gained 0.1 percent to 92.21 yen.

But it was off its earlier high of 92.43 yen hit as Peng Junming, an official in the asset allocation department of China International Corp, the country's $300 billion sovereign wealth fund, also said the yen would continue to drop.

The yen had been broadly firmer in early trade as investors cut yen selling positions that had pushed it to an over 15-month low against the Australian dollar, with traders citing Japanese investors repatriating funds invested in euro-denominated bonds.

The euro fell as low as $1.4453 on EBS before rebounding to trade at $1.4488, down 0.2 percent on the day. It was below a three-week high of $1.4557 hit the previous day.

The euro nearly erased an earlier 0.5 percent loss below 133 yen to trade flat on the day at 133.60 yen.

The Australian dollar also cut earlier losses as much as 0.8 percent slide to stand at 85.47 yen, down 0.2 percent and retreating from its more than 15-month high of 86.20 yen struck the previous day.

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The dollar recovered some of the losses that took it to three-week lows hit after weaker-than-expected jobs data revived expectations that U.S. interest rates will stay low for a longer period.

The dollar's rebound was partly helped by a declining U.S. stock futures in Asian trade, after the earnings season got off to a mixed start with Alcoa missing Wall Street's forecast..

The decline in U.S. stock futures cut some support to higher-yielding currencies.

Still, expectations for strong earnings later this week, coupled with robust Chinese trade data on Monday, provided support to optimism about a global recovery, slowing the U.S. dollar's gains. (Additional reporting by Kaori Kaneko; Editing by David Dolan)

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