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FOREX-Dollar flat; buffeted by Asia talk, consolidation

Published 11/12/2009, 03:48 AM
Updated 11/12/2009, 03:51 AM

* APEC ministers to call for "market-oriented" forex rates

* Euro seen hugging $1.50 options level

* Aussie dollar at 15-month high after jobs data

(Recasts, updates prices, adds comment and quotes, changes byline and dateline. Previous: TOKYO)

By Jamie McGeever

LONDON, Nov 12 (Reuters) - The dollar was little changed on Thursday, struggling amid growing calls for Asian currencies to trade more freely -- effectively appreciate -- but supported by profit-taking on recent gains in other currencies like the euro.

With a light economic data calender on Thursday, apart from strong Australian jobs numbers that boosted the Aussie dollar to a 15-month high, the broader market was left to consolidate.

Asia-Pacific finance ministers gathered in Singapore ahead of a summit of their national leaders this weekend are expected to call for flexible exchange rates.

The latest draft of a communique to be issued after their meeting on Thursday called for "market-oriented" exchange rates and interest rates.

This came a day after the Chinese central bank, which holds the world's largest foreign exchange reserves stash of more than $2 trillion, said it would consider major currencies in guiding the yuan, suggesting a departure from an effective dollar peg that has been in place for more than a year.

But the steady pace of dollar selling in recent weeks on the view U.S. interest rates will remain low for some time has provided traders with decent levels to cash in on the corresponding gains in other currencies.

A large amount of euro/dollar options expiring at $1.5000 on Thursday were also capping the euro's upside, traders added.

"The dollar is lower mainly because interest rates are low, so there's no support there" but pressure on China and other Asian countries to revalue their currencies "could take away some of the upside pressure on the euro," said Marcus Hettinger, currency strategist at Credit Suisse in Zurich.

"For today, most currencies will consolidate because we have no more major data ... with the euro around $1.50," he added.

At 0820 GMT the dollar index, a gauge of the greenback's performance against six major currencies, was at 75.16, unchanged on the day. It hit a fresh 15-month low of 74.774 on Wednesday.

The euro was down 0.1 percent at $1.4965. It had touched $1.5049 on trading platform EBS on Wednesday, within sight of the 2009 high of just above $1.5060 hit last month.

The dollar was flat against the yen at 89.80 yen, and sterling fell further following comments on its weakness from Bank of England Governor Mervyn King on Wednesday. It was down 0.25 percent at $1.6525.

OBAMA'S CHINA VISIT EYED

The APEC group of 21 Pacific Rim countries includes China, which is under pressure, particularly from the United States, to allow its currency to rise.

Dealers said they were watching further developments after China said it would consider using a basket of currencies, not just the dollar, in guiding the exchange rate of the Chinese yuan, its clearest signal yet that it was close to letting the yuan appreciate after an 18-month hiatus.

U.S. President Barack Obama visits China next week, and market participants expect currencies to be discussed.

"The message we draw from the shift in the (Chinese central bank's) carefully chosen words is that trend decline in the dollar will no longer be resisted to the same degree," said Westpac in a research note.

"We expect greater movement on dollar/yuan soon, quite possibly ahead of Obama's meetings with top Chinese officials next week and with a European delegation also arriving in China before year-end," they said.

The Aussie rose after stronger-than-expected Australian employment data for October, fuelling bets for another interest rate hike by the Reserve Bank of Australia in December.

The Aussie was up around 0.3 percent at $0.9330 after touching $0.9370, its highest since August 2008.

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