* Dollar index down 0.7 pct at 76.544 <.DXY>
* Euro up on ECB 1-year cash tender results
* Aussie up; yen, stg higher driven by quarter-end flows
* Norwegian crown gains on hawkish central bank comments
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By Tamawa Desai
LONDON, Sept 30 (Reuters) - The dollar was broadly lower on
Wednesday, losing ground against currencies including the pound,
yen and Australian dollar, while the euro gained on results of a
European Central Bank cash tender offer.
The volume of bids at the one-year tender was lower than
expected. [] That implied financial conditions in
the euro zone were improving and that there may be less need for
the ECB to flood the money market with liquidity.
"The economy has turned a corner and the bottom line is that
central banks are making the first tentative steps towards
unwinding the emergency liquidity programmes, and maybe the ECB
will do so in the next few months as well," said Kenneth Broux,
financial markets economist at Lloyds Banking Group.
The implied euro zone-U.S. interest rate gap based on March
2010 Euribor and eurodollar futures contracts widened by 5 basis
points to 31 basis points, Reuters charts showed, boosting the
euro's yield appeal.
The euro was up 0.5 percent on the day, holding near a
session high of $1.4673 hit after the tender results.
By 1111 GMT, the dollar index was down 0.7 percent on the
day at 76.565 <.DXY>, within sight of its eight-month low just
below 76.0 struck last week.
A turnaround in equity markets, with U.S. stock futures in
positive territory, also weighed on the dollar, said Geoffrey
Kendrick, currency analyst at UBS.
YEN EDGES UP, STERLING GAINS
The dollar dipped to 89.36 yen <JPY=>, close to an
eight-month trough of 88.23 yen hit on Monday. The yen gained
some momentum after Japanese Finance Minister Hirohisa Fujii
said Tokyo had no plans to bring up the yen's recent rise at a
weekend Group of Seven finance leaders' meeting. []
Sterling drew further support from the biggest rise in UK
consumer morale for 14 years, extending Tuesday's rebound on
talk the Bank of England was not likely to cut the rate of
interest it pays on bank deposits any time soon.
The pound was up 0.8 percent on the day at $1.6099 <GBP=D4>.
Meanwhile, hawkish comments from Norway's central bank chief
pushed the Norwegian crown to a 11-month high against the euro.
Norges Bank Governor Svein Gjedrem said the central bank may
start to raise interest rates from record low levels sooner than
it projected in June. []
The central bank kept its key rate unchanged last week, but
said it had considered raising it. Analysts expect a hike as
early as October.
Other big gainers included the Australian and New Zealand
dollars. The Aussie rose more than 1.0 percent on the day to a
13-month peak of $0.8837 <AUD=D4> after strong retail sales data
added to the case for a rise in interest rates as early as
November. []
The kiwi rose 0.9 percent on the day to hold above $0.72
<NZD=D4> as strong business confidence data fed speculation
about an eventual rise in New Zealand interest rates.
Sentiment toward the dollar remains broadly bearish. It has
lost 10 percent of its value on a trade-weighted basis over the
last two quarters as ultra-low U.S. interest rates and huge
supply of greenbacks have tempted investors to sell it for
higher-yielding currencies and assets.
(Additional reporting by Jamie McGeever, editing by Nigel
Stephenson)
