* Euro slips vs dollar, yen before finance ministers meet
* Market wary ministers might speak against euro strength
* Strong comments by ministers seen unlikely
* Aussie edges up but off 14-month peak
By Charlotte Cooper
TOKYO, Oct 19 (Reuters) - The euro backed off a 14-month high
against the dollar and a two-month peak against the yen on Monday
as investors trimmed long positions on caution about what euro
zone finance ministers may say about its recent strength.
The high-flying Australian dollar also ran into a spell of
profit-taking as investors notched back their holdings after Bank
of America <BAC.N> posted a large quarterly loss and data offered
fresh evidence that U.S. consumers were still struggling. []
Euro zone finance ministers are expected to meet later on
Monday and Eurogroup chairman Jean-Claude Juncker said last week
the strength of the euro had not yet caused too much concern but
that a continued rise could slow Europe's recovery.
[]
The euro has appreciated about 6 percent against the dollar
so far this year and at the end of last week it neared $1.50
<EUR=>, a level unseen since August last year. As the
low-yielding dollar has been sold as a funding currency for
higher-yielding and higher-growth assets the euro has gained.
"I'm not sure if something strong or coordinated will come
from this meeting but from a valuation perspective the markets
are worried about the euro," said Masafumi Yamamoto, chief FX
strategist Japan at Barclays Capital in Tokyo.
The euro slipped 0.2 percent from Friday's levels to $1.4875
<EUR=>. One trader at a European bank said there was support at
$1.4840/45. But $1.50 is a target on the market's radar and the
trader speculated there might be options barriers at that level.
The euro also eased 0.3 percent to 135.15 yen <EURJPY=R>,
after slipping as far as 134.76 earlier. It touched 136.07 yen on
Friday, its strongest since late August.
The dollar rose 0.1 percent against a basket of six
currencies <.DXY>, edging further above a 14-month low set last
week.
The dollar made up a bit of ground on Friday after news of
the large quarterly loss at Bank of America and falling consumer
confidence dulled investor demand for the higher yielders, which
have benefited this year as investor confidence has picked up.
Both the Australian and New Zealand dollars were down from
highs set on Friday and some of that pegging back continued into
Monday, with the market cautious ahead of more earnings reports
from major U.S. firms this week, including bellwethers Apple Inc
<AAPL.O> and Caterpillar <CAT.N>.
But after Australia's rate rise earlier in the month a senior
central bank official said it was entirely appropriate to return
to more normal monetary policy settings given that uncertainty
from the global financial crisis had eased, and the Australian
dollar headed back up to the day's highs. []
It rose 0.4 percent up on the day to $0.9180 <AUD=D4>,
although short of Friday's 14-month peak of $0.9271.
"The broad market trend for a weaker dollar and upward
high-yielding currencies basically remains intact on the back of
growing optimism about the global economy," said a trader at a
Japanese bank.
"Although there were some disappointing U.S. corporate
earnings, the market holds the view that overall U.S. corporate
results are not so negative. We'll probably see some
profit-taking in high-yielders and yen crosses but they are
basically on a rising trend," he said.
The yen firmed to 90.75 yen to the dollar <JPY=> after
slipping to its weakest in three weeks on Friday. The yen hit an
eight-month peak of 88.01 per dollar earlier in October but a
squeeze of dollar short positions has helped the greenback snap
back in the past week.
The latest data from the Commodity Futures Trading Commission
showed speculators cut net long positions on the yen. Net short
positions on the U.S. dollar also fell, with the value of the
dollar's net short positions falling to $17.99 billion in the
week to Oct. 13 from $20.2 billion a week earlier. [].
Some traders expected the yen to fall to 91.63 yen and then
92.54 yen in the short term, both of which were briefly intraday
highs for the dollar in September.
"For many, the stars appear to be lining up for a sizable
correction higher in dollar/yen as leveraged retail sellers of
the yen return in large size and Japanese institutional
diversification into overseas assets has accelerated," said
Adam Cole, global head of forex strategy at RBC Capital.
"We don't agree and expect dollar/yen rallies to be short,
shallow and generally to be faded."
The pound <GBP=D4> slipped 0.1 percent to $1.6330 after Bank
of England monetary policy committee member Adam Posen said in a
newspaper interview on Sunday that the central bank's
quantitative easing should continue. [].
Another market moving factor this week will be a spate of
Chinese economic data, including third-quarter gross domestic
product.
(Additional reporting by Anirban Nag in Sydney and Kaori Kaneko
in Tokyo; Editing by Michael Watson)
