* Dollar dips broadly on position unwinding
* Euro edges higher, CTA buying cited
* Dollar falls vs yen on selling by Japanese exporters
* NZ confidence data, higher oil reinforce dollar selling
By Masayuki Kitano
TOKYO, Aug 27 (Reuters) - The dollar fell against the euro on
Wednesday, after hitting a six-month high the previous day as
German business morale slumped to multi-year lows and reinforced
views the European Central Bank will eventually cut rates.
The euro had slid on Tuesday after the Ifo German business
climate index in August fell to a three-year low, the latest sign
that weakness in the U.S. economy had spilled over into other
major economies. []
The euro, sterling and high-yielding currencies such as the
Australian dollar have slid sharply since late July due to
mounting signs that economic weakness has spread beyond the
United States.
The dollar is expected to be supported from global economic
deterioration as the Federal Reserve was likely to keep interest
rates on hold in the coming months while central banks in the
euro zone, Britain, Australia and New Zealand were seen lowering
interest rates, either this year or sometime next year.
But as investors pared back positions on Wednesday, the
dollar slipped broadly, falling 0.5 percent against a
trade-weighted basket of six major currencies <.DXY> and off the
eight-month high of 77.619 hit on Tuesday.
For the month, the dollar index was still up 5 percent, set
for its biggest monthly gain since January 1997.
"Fund operators are trimming their long dollar positions. The
moves are not being caused by any particular factors," said
Shuichi Kanehira, a senior forex trader at Mizuho Corporate Bank.
The euro rose as high as $1.4744 <EUR=>, bouncing back to
levels before the single currency hit a six-month low of $1.4570
on trading platform EBS on Tuesday.
The euro was up 0.5 percent to $1.4720, with traders citing
as a factor buying by trend-following Commodity Trading Advisers
or CTA funds, also known as managed futures firms.
Sterling rose 0.4 percent to $1.8466 <GBP=D4>, after slumping
to a two-year trough of $1.8330 on Tuesday.
The dollar fell 0.5 percent against the yen to 109.05 yen
<JPY=>, dragged down by selling by Japanese exporters. Such
commercial flows tend to pick up towards the month-end.
A near $1 increase in oil prices to above $117 <CLc1> and New
Zealand's better-than-expected business confidence data also
reinforced dollar selling.
DOLLAR SEEN SUPPORTED
The dollar was likely to remain supported by a process of
elimination, traders said, despite lingering worries about U.S.
financial institutions' losses from the turmoil in credit
markets.
"There are various negative factors against currencies other
than the dollar, and we are not in a risk-taking environment,"
said Kanehira at Mizuho Corporate Bank.
The Fed is seen likely to raise U.S. interest rates by around
50 basis points from the current 2.0 percent by next August
<FEDWATCH>.
"Whether it's cable, the euro, Aussie or kiwi, there is
little sign yet that they have bottomed out," said a trader for a
major Japanese trading house.
Higher-yielding currencies likely have more room to fall,
especially against the yen, he said.
The Australian dollar rose 0.5 percent to $0.8591 <AUD=D4>,
having edged up from an 11-month low of $0.8493 hit on Tuesday.
Interest rate futures are pricing in a 25 basis point rate
cut by the Reserve Bank of Australia early next month to cushion
the economy. []
(Additional reporting by Chikako Mogi; Editing by Edwina Gibbs)
