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FOREX-Dollar slips after APEC, risk demand rises

Published 11/16/2009, 04:03 AM
Updated 11/16/2009, 04:06 AM
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* Dollar slips, APEC offers limited FX direction

* U.S., China fail to agree on currency position

* Dollar index hovers near 15-month low

(Adds comment, updates throughout; previous TOKYO)

By Naomi Tajitsu

LONDON, Nov 16 (Reuters) - The dollar slipped on Monday as traders took a lack of agreement on currencies among Asian and U.S. leaders as a cue to sell the greenback, even as speculation of a near-term yuan appreciation cooled.

The U.S. currency also came under selling pressure with European shares rising and gold hitting a fresh record high, suggesting an increase in risk appetite.

The United States and China failed to reach an agreement over currencies at a summit of the Asia Pacific Economic Cooperation (APEC) forum in Singapore at the weekend, resulting in the omission to a reference to "market-oriented exchange rates" from the communique [ID:nSP43459]

Analysts said the APEC meeting offered little new direction on currencies, which traders took as a green light to keep the dollar's ongoing downtrend intact on the view that U.S. interest rates will stay low as those in other countries eventually rise.

"There were no comments against the weak dollar (from APEC), and that's giving the market free rein to sell the dollar," said Ante Praefcke, currency strategist at Commerzbank in London.

The disagreement between Washington and Beijing comes as U.S. President Barack Obama visits China this week. The yuan's peg to the dollar keeps the Chinese currency weak against its U.S. counterpart, and any yuan appreciation is seen weakening the dollar.

By 0842 GMT, the dollar was down roughly half a percent to 74.990, near a 15-month trough hit last week.

The euro rose 0.4 percent to $1.4975, edging closer to the psychologically key $1.50 level. Market participants said the euro was supported by a 0.7 percent rise in European shares <.FTEU3> in early trade.

The dollar slipped 0.3 percent to 89.50 yen.

Traders offered limited reaction to data showing Japan's economy grew at the fastest pace in more than two years in the third quarter as stimulus lifted consumer spending and capital spending rose. [ID:nT339912]

U.S. RETAIL SALES AWAITED

Trading ranges were small as the market watched comments from the International Monetary Fund on Monday saying a stronger yuan was part of the reforms Beijing needed to boost domestic consumption. [ID:nPEK158236]

Also on Monday, a Chinese Commerce Ministry official said the country should keep the currency stable as it was beneficial to a global recovery.[ID:nBJB003572]

Traders were also looking at flow direction, watching for yen outflows from Japanese investment trusts launching on Monday and Tuesday, as well as looking for signs of yen repatriation from U.S. Treasury coupon flows which fell due on Nov. 15.

A final reading of euro zone inflation for October is due at 1000 GMT, but with little in the way of economic data or events in the European session, analysts said the market would be watching U.S. retail sales due later in the day.

A Reuters poll showed expectations for sales to rise in October, reversing a fall the previous month, and analysts said a strong reading boost risk appetite, which may push the dollar lower.

(Additional reporting by Tokyo Forex Team, editing by Nigel Stephenson)

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