* Euro dips from 1-year highs, Aussie and kiwi fall
* Greenback gets respite ahead of long weekend in Asia
* Dollar index off 1-year lows, but downtrend seen intact
* GBP dips, source says FSA hinders Lloyds' asset scheme exit
By Masayuki Kitano
TOKYO, Sept 18 (Reuters) - The dollar rose against the euro
on Friday, edging up from a one-year low hit the previous day,
as investors covered short positions in the wake of the
greenback's slide during the week.
The dollar has retreated broadly since March as investors
shift into riskier assets due to increasing signs that the global
economy is on the mend, and it extended its losses this week as
equities and commodities rallied.
But the battered U.S. currency gained some reprieve on Friday
as investors trimmed their positions ahead of holidays in Japan
and Singapore next week, although the trend for broad dollar
weakness was seen as likely to persist.
"There is a lot of money sloshing around and that situation
is likely to continue, since exit strategies are unlikely to be
implemented very soon," said Akira Hoshino, chief manager for
Bank of Tokyo-Mitsubishi UFJ's foreign exchange trading
department.
"Money that had been parked in dollars has been seeping out
gradually and that trend is continuing," he said.
The euro dipped 0.2 percent from late U.S. trading on
Thursday to $1.4717 <EUR=>.
The euro, which hit a one-year high of $1.4768 on trading
platform EBS on Thursday, has risen about 2.8 percent in the past
two weeks.
The dollar edged up 0.2 percent against the yen to 91.30 yen
<JPY=>, having rebounded from a seven-month low of 90.12 yen hit
on Wednesday.
The yen reached that peak against the dollar after Japan's
new finance minister, Hirohisa Fujii, said on Wednesday he
opposed currency intervention as long as market moves were
moderate. []
Some disappointed traders cut yen buying positions versus the
dollar after the currency came short of reaching the
psychologically key 90.00 yen level this week even after Bank of
Japan Governor Masaaki Shirakawa said on Thursday that a rise in
the yen may support Japan's economy in the long term.
[]
The dollar index, which measures the dollar's value against a
basket of six major currencies, rose 0.2 percent to 76.353
<.DXY>, having bounced off Thursday's one-year low of 76.010.
For now, the dollar is edging higher on short-covering, said
Hoshino at Bank of Tokyo-Mitsubishi UFJ.
"There is some position adjustment taking place, with Asian
players facing a long weekend," Hoshino added.
Sterling fell 0.4 percent to $1.6383 <GBP=D4> and hit a
four-month low against the euro after a source familiar with the
matter said British regulators set tougher than expected terms on
Lloyds' <LLOY.L> mooted exit from a government scheme to insure
it against credit losses, hindering its departure from the
programme. []
DOLLAR WEAKNESS INTACT
Market players said the dollar's respite could prove
short-lived.
"We are seeing a bit of a pullback but the broader U.S.
dollar weakness remains intact as it turns to be the currency for
carry trades," said Jonathan Cavenagh, currency strategist at
Westpac.
"Technically, the euro still looks very upbeat with strong
support seen around $1.47. Also for the dollar index, while there
is support around the 75.65 level, if that gives way, we could
see it fall all the way down to 71."
The dollar index has shed over 2 percent this month on
mounting speculation the greenback is fast becoming the preferred
funding currency for carry trades.
Currency traders in Tokyo said the dollar could fall below 90
yen during Japan's three-day holiday period starting next Monday.
The dollar has been supported against the yen in the past few
days due to some scattered dollar buying by Japanese investors
and importers, said Bank of Tokyo-Mitsubishi UFJ's Hoshino.
The absence of such flows during the holiday period could
leave the dollar vulnerable against the yen, Hoshino said.
The Australian dollar <AUD=D4> fell 0.2 percent to $0.8707,
down from a 13-month high of $0.8776 hit on Thursday. Strong
support is expected to emerge at around $0.8680.
The New Zealand dollar dipped 0.1 percent to $0.7100
<NZD=D4>, having come off a 13-month high of $0.7159 hit on
Thursday.
(Additional reporting by Anirban Nag in Sydney and Satomi Noguchi
in Tokyo; Editing by Joseph Radford)
