* Investors wind up short dollar positions for year end
* Euro falls through $1.4500 barrier, hits stops beneath
* Slightly more upbeat Fed economic view supports dollar
* Some charts put question marks over dollar downtrend
By Satomi Noguchi
TOKYO, Dec 17 (Reuters) - The dollar surged to three-month
highs on Thursday, knocking down a succession of barriers, as
investors wound up short positions for the year after a more
upbeat tone from the Federal Reserve helped support its recent
rebound.
The euro spun to its lowest since early September, picking up
pace after it broke strong support at $1.4500 and hit stop-loss
sell orders, prompting more liquidation of long-euro positions.
The Australian dollar fell more than 1 percent against the
dollar to hit its lowest in more than two months as Aussie-long
liquidation also emerged after a break below support at $0.8900.
Traders said a statement by the Federal Reserve sounded a bit
more optimistic about the U.S. labour market and helped the U.S.
dollar, which has spent most of the year locked in a downtrend.
Now the dollar index, a gauge of its performance against six
major currencies, has broken out of that downtrend and some
players are more confident there may scope for it to recover
further.
The dollar has been dogged this year by the prospect of
interest rates staying close to zero. Although the Fed repeated a
vow to keep rates low for "an extended period", traders said that
did not put investors off dollar short-covering that began
earlier this month as economic data showed improvement.
"I thought that the dollar rebound might end as the Fed
concluded its policy meeting, but actually what we are seeing is
more dollar buying," said a trader for a Japanese trust bank.
"Dollar buying interest is especially strong against the euro
and the Aussie. This move suggests to me that the dollar looks
like it has started another bull run before year-end," the trader
said.
The euro fell more than 1 percent to $1.4369 on trading
platform EBS, its lowest since early September, before trading at
$1.4401 <EUR=>, down 0.9 percent on the day.
Traders said volume was not bad but liquidity was poor ahead
of the year end, making price movements choppy.
With bonuses often already decided by now, dealers tend to be
unwilling to take risks by holding positions to try to make money
and instead want to cover client flows and execute orders as
quickly as possible.
Sentiment towards the euro remained sour, with angst over
European banks, cuts in Greece's credit ratings, and a view that
the U.S. economy was recovering faster than the euro area which
could mean the Fed might tighten before the European Central
Bank.
The higher yielding Australian dollar, which has been a
popular buy against the dollar this year, tracked the euro down,
falling as far as $0.8872, its weakest since early October. It
stood at $0.8900 <AUD=D4> by 0700 GMT, down 1.2 percent.
The Aussie has been under pressure since Reserve Bank of
Australia Deputy Governor Ric Battellino surprised markets on
Wednesday by signalling interest rates might not rise as much as
investors were expecting.
The dollar index rose as far as 77.609, its highest since
early September. The index broke above its downtrend early this
month and on Wednesday its 14-day moving average crossed up
through the 30-day MA, viewed by chartists as a bullish signal.
Some traders say however the dollar's rebound this month is
more related to year-end demand than a lasting turnaround and
that stretched dollar-short positions needed to be unwound.
"There is an impression that the market for the weak dollar
is coming to an end, especially after seeing a raft of
better-than-expected economic data," said Shuichi Kanehira, head
of forex spot trading at Mizuho Corporate Bank.
"But it is probably too early to say the U.S. economy is on a
path towards stable recovery, and I see dollar-selling remaining
a dominant play into the first half of next year," Kanehira said.
Against the yen, however, it remains in a downtrend stemming
back to April and is only about 5 yen above a 14-year low set at
the end of November.
It rose as high as 90.27 yen on EBS, before slipping back to
89.95 yen <JPY=>, up just 0.2 percent on the day.
Strength against other currencies helped it rise towards a
one-month high of 90.78 yen touched earlier this month, but
offers from Japanese exporters slowed it up against the yen,
traders said.
(Additional reporting by Charlotte Cooper; Editing by Joseph
Radford)
