FOREX-Dollar resumes drop after G20, eyes on Fed

Published 10/24/2010, 10:18 PM
Updated 10/24/2010, 10:20 PM

* G20 vows to refrain from competitive devaluations

* Market awaiting further clues on possible Fed easing

* Investors including CTAs buy euro and Aussie -trader

By Masayuki Kitano and Charlotte Cooper

TOKYO, Oct 25 (Reuters) - The dollar fell broadly on Monday as investors interpreted a Group of 20 agreement to shun competitive currency devaluations as a green light to resume dollar selling.

At the meeting in South Korea, G20 finance ministers also struck a surprise deal to give emerging nations a bigger voice in the International Monetary Fund, recognising the quickening shift in economic power away from Western industrial nations.

Analysts said the outcome at the G20 pointed to the continuation of a status quo in currency markets, with the dollar staying under pressure due to market expectations for the U.S. Federal Reserve to unveil a second round of quantitative easing as early as November.

"It looks like the market has taken the G20 as a green light to continue with the trends up to that point, which have been towards U.S. dollar weakness," said Sue Trinh, senior FX strategist at RBC in Hong Kong.

The euro climbed 0.5 percent from late U.S. trading on Friday to $1.4022.

A break of $1.4051, the 76.4 percent retracement of the euro's drop to $1.3697 last week from an 8-½ month high of $1.4161 hit earlier this month on trading platform EBS, would open the way for a retest of that $1.4161 peak.

But another failure near $1.4050 could see a quick move back down to $1.3700 or even to $1.3580.

The Australian dollar surged 0.9 percent to $0.9906.

One trader said real money accounts and trend-following commodity trading advisers were detected buying the euro and the Australian dollar.

A trader for a Japanese bank said Asian accounts appeared to be buying the euro and the Australian dollar, adding that they may be building up fresh positions after having trimmed them before the G20 meeting.

"My overall impression is that there was nothing out of the G20 meeting that would lead to a dollar rise, or higher risk in selling the dollar," the Japanese bank trader said.

The dollar's broad slide was reflected in the dollar index, which measures its value against a basket of currencies. The index slipped 0.6 percent to 77.031.

The dollar fell 0.4 percent against the yen to 81.07 yen, dipping back toward a 15-year low of 80.84 yen struck on trading platform EBS earlier in October. (Additional reporting by Ian Chua and Reuters FX analyst Krishna Kumar in Sydney, Hideyuki Sano in Tokyo; Editing by Edmund Klamann)

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