* Dollar up from 14-mth lows on stocks slip, profit-taking
* Yen slides broadly on yield spreads; 3-week low vs dlr
* Euro struggles at $1.50; sterling short covering continues
(Recasts, updates prices, adds comment and quotes, changes
byline)
By Jamie McGeever
LONDON, Oct 16 (Reuters) - The dollar strengthened on Friday
as Bank of America earnings fell short of expectations, sparking
profit-taking in currencies that earlier hit multi-month highs
against the greenback, as well as equities and commodities.
The dollar's broad recovery, though modest, was enough to
take it further away from the psychologically key $1.50 level
against the euro and further above the 90.00 yen level, with the
latter move also supported by government bond yield spreads.
Bank of America Corp <BAC.N> posted a third quarter loss of
$1 billion, its second loss in less than a year and
disappointing markets which this week had had more upbeat
earnings results from other large U.S. banks and companies.
The dollar has traded inversely to stocks and financial
market sentiment recently as the huge supply of dollars around
the world and expectations of prolonged low U.S. interest rates
has fueled demand for other currencies and assets.
The dollar hit 14-month lows on an index basis and against
the euro on Thursday, matching those troughs earlier on Friday,
and printing a fresh 14-month high against the Australian dollar
on Friday.
But the BofA results prompted traders to square positions
and take cash off the table ahead of the weekend.
"There's been a decent move over the week and ahead of the
weekend you have to ask yourself are they (investors) going to
push it much more? Unlikely," said Paul Mackel, senior currency
strategist at HSBC in London.
"Equities are looking a bit shaky and it's the end of the
week. So put the two together and the dollar is biased to the
upside," he said.
At 1145 GMT the dollar index, a measure of its value against
six major trading partner currencies, was up a third of a
percent at 75.74 <.DXY>. Earlier, it matched Thursday's 14-month
low of 75.211.
The dollar was up 0.7 percent against the yen at 91.20 yen
<JPY=>, just shy of a three-week high around 91.30 yen hit
earlier on Friday.
The euro fell half a percent to $1.4875 <EUR=>, almost a
full cent down from an earlier peak of $1.4968 <EUR=> on trading
platform EBS, its highest since August last year.
YEN WEAKNESS WIDELY SPREAD
The Australian dollar was down a third of a percent at
$0.9180 <AUD=D4>, heaving earlier hit a 14-month high around
$0.9271.
European stocks turned negative <>, with banking
shares underperforming the broader index by two to one <.SX7P>,
and U.S. futures pointed to a lower open <SPc1>.
Sentiment towards the U.S. currency remains broadly
negative, however, and it is not far from these 2009 lows
against the euro and higher-yielding currencies such as the
Australian and New Zealand dollars.
Analysts said the dollar's rise on Friday did not reflect
any change to this broad scenario but said investors were wary
that currencies such as the euro and the Australian dollar may
have limited scope for further gains. The euro, in particular,
faced stiff resistance before the key $1.50 level.
The yen bore the brunt of the dollar's recovery on Friday,
and also slid against other currencies as Japanese investors
sought out higher returns from foreign fixed income markets.
The 10-year euro zone/Japan yield spread, for example, has
risen 15 basis points in the past week to 199 basis points,
while the comparable U.S./Japan spread is up almost 25 basis
points since Thursday last week to around 215 basis points.
"There has been a small improvement in the outlook for U.S.
rates relative to Japanese rates, which has weighed on the yen,
along with the view that dollar/yen had been oversold over the
last couple of weeks," said Bank of Scotland Treasury currency
analyst Naeem Wahid.
Analysts at Citigroup said in a note this trend in spreads
could continue to move "more markedly" against the yen.
Investors will now turn their attention to U.S. capital
flows data for August, at 1300 GMT. <ECON>
