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FOREX-Dollar gains after euro zone officials' comments

Published 11/17/2009, 07:07 PM
Updated 11/17/2009, 07:09 PM

* Dollar's long-term weakness seen unchanged

* Market watching Obama and Wen meeting

By Kaori Kaneko

TOKYO, Nov 18 (Reuters) -The dollar gained on Wednesday as investors trimmed short positions after euro zone economic policymakers followed U.S. Federal Reserve Ben Bernanke in commenting about the merits of a strong dollar.

But dealers said the greenback's rebound will likely limited and that the trend of a long-term dollar decline has not changed.

European Central Bank President Jean-Claude Trichet said on Tuesday that a sound U.S. currency was in the interest in the entire international community. His remarks were echoed by Eurogroup chairman Jean-Claude Juncker, who heads the group of euro zone finance ministers.

Bernanke gave rare comments on Monday about the value of the dollar, drawing a link between its current weakness and inflation risks.

"The dollar's rebound can be explained by the adjustment of short positions," said Tomohiro Nishida, treasury department manager at Chuo Mitsui Trust and Banking Company.

"It's going to be hard for the dollar to gain further, since it looks like that the U.S. will keep its low interest rate policy for a while," he said.

The dollar index was trading around 75.319 after striking a 15-month low of 74.679 on Monday.

The euro was little changed at $1.4877 after rising as high as $1.5000 on trading platform EBS on Tuesday.

The dollar was steady at 89.27 yen after touching 88.73 yen on EBS the previous day, its lowest in one-month.

The market will be watching U.S. President Barack Obama's meeting with Chinese Premier Wen Jiabao later in the day although few expect any near-term changes in Beijing's foreign exchange policy.

The U.S. President on Tuesday made plain in a summit with President Hu Jintao that one of his topmost concerns was China's currency policy.

The Australian dollar was trading around $0.9312 after falling as low as $0.9237 on Tuesday.

The upside for the Aussie was capped after minutes for the Reserve Bank of Australia's last policy meeting on Tuesday showed that outlook for further tightening was uncertain.

The Aussie hit a 15-month high of $0.9407 on Monday. The Australian third-quarter wage price index is due at 0030 GMT.

Other data due later on Wednesday include the U.S. consumer price index and housing market data for October due at 1330 GMT. (Reporting by Kaori Kaneko; Editing by Edwina Gibbs)

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