* Dollar index pulls up from 10-month trough
* European stocks lower, track declines in Asian
* Oil, gold weighed down by dollar's rise
* Bernanke cements easing view, offers no specifics
* IBM, Citigroup earnings, U.S. industrial output data eyed
By Vikram S.Subhedar
HONG KONG, Oct 18 (Reuters) - The battered dollar rose on
Monday, edging further away from a 10-month low, while Asian
stocks pulled back from a two-year high as markets awaited
details of a widely expected easing in U.S. monetary policy.
Major European stock markets opened lower, with Britain's
FTSE 100 <> down 0.3 percent, France's CAC 40 <> down
0.5 percent and Germany's DAX <> falling 0.4 percent.
Federal Reserve chief Ben Bernanke cemented expectations on
Friday of more U.S. stimulus to fend off deflation, prompting a
reversal of trades that had been pushing the dollar lower and
most Asian stocks higher for weeks. []
The prospect of the Fed pumping billions of dollars into
its economy has sparked huge capital flows into high-yielding
emerging markets, pushing up their currencies and prompting
some countries to take steps to control the inflows from
destabilising their economies. The Fed reviews policy on Nov.
2-3.
Rising global currency tensions, pitting the developing
world against the developed world, will be the focus of a
meeting of G20 finance leaders in South Korea, starting on
Friday.
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Estimates of Asian central bank intervention
[]
Japan Reuters Tankan: http://link.reuters.com/wyt48p
Australia economic suite: http://link.reuters.com/syh88p
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Asian stocks outside Japan <.MIAPJ0000PUS>, which have
rallied steadily since last August, fell 1.4 percent on Monday.
The dollar index <.DXY> rose 0.5 percent, as traders
covered some short-positions and as investors bet the Fed would
be successful in generating more inflation. The index is still
down more than 6 percent following a sell-off from a September
high.
"Expectations of QE2 are fully priced in for November or
December. Questions remain exactly on the extent of that QE2,"
said Sue Trinh, senior currency strategist at Royal Bank of
Canada, referring to a second round of quantitative easing.
"Overall, with the downside and the bad news pretty much
fully factored in for the U.S. dollar, the risk is towards more
of a dollar squeeze, especially given how skewed positioning is
ultimately," Trinh added.
Japan's Nikkei average <> pared all its gains to close
flat, pressured by the yen, which stayed near a 15-year high
against the dollar, and as investors turned cautious ahead of
U.S. banks reporting earnings.
The U.S. earnings season picks up steam this week, with 109
S&P 500 companies and 11 Dow components scheduled to report
results, with investors closely watching for corporate
profitability to sustain the recent rally in stocks.
Among the companies scheduled to report later on Monday are
Citigroup <C.N>, IBM <IBM.N> and Apple <AAPL.O>.
DOLLAR REBOUND
The greenback extended a rebound that started late last
week, with the euro <EUR=> retreating further from an
eight-month high and the Australian dollar <AUD=D4> backing off
from Friday's peak above parity that was the highest since it
was floated in 1983.
Market players said the short-covering bounce in the dollar
may have more room to run given that bets against the U.S.
currency remained at elevated levels.
Data from the U.S. Commodity Futures Trading Commission
showed speculators trimmed bets against the dollar in the
latest week but still had hefty wagers against it. []
The value of the dollar's net short position slipped to $29
billion in the week ended Oct. 12, down from a net short of
$30.5 billion in the previous week, the biggest bet against the
dollar since at least June 2008.
Traders said short-term speculative and model accounts were
active in the Asian session as the euro fell 0.8 percent to
test support at $1.3865. Next downside targets are channel
support at $1.3825 and then the Oct. 12 low of $1.3775. []
Oil <CLc1> fell 0.8 percent towards a one-week low,
extending last week's drop, as a stronger dollar halted a
charge into commodities.
Metal prices were also lower with spot gold <XAU=> down
more than 0.7 percent and silver <XAG=> falling about 2
percent.
The weakening trend in the dollar had drawn funds to
commodities and had propelled gold to a record high last week.
(Additional reporting by Masayuki Kitano, Chikafumi Hodo in
TOKYO; Editing by Alex Richardson)
