* Dollar slips as oil rises on supply concerns
* 3-day U.S. weekend encourages players to sell dollar
* Dollar still set for biggest-ever monthly gain vs euro
* Sterling set for biggest monthly loss in nearly 16 years
By Shinichi Saoshiro
TOKYO, Aug 29 (Reuters) - The dollar retreated against a
basket of currencies on Friday as oil prices rose on worries
about supply and some investors booked profits on the greenback's
sharp rise this month.
Britain's Daily Telegraph reported Russia may restrict oil
shipments in the coming days in response to the European Union's
threat of sanctions over its military action in Georgia.
Traders said the report, along with the approach of Tropical
Storm Gustav towards the Gulf of Mexico, gave a lift to oil
prices and helped push the dollar lower. []
The dollar gave up some gains made on Thursday on data
showing the U.S. economy grew at a faster pace during the second
quarter than initially thought.
The dollar index <.DXY> dipped 0.3 percent to 76.936. Oil
<CLc1> rose more than $1 to around $117 a barrel.
U.S. markets will be closed on Monday for the Labor Day
holiday and this also encouraged market participants to sell the
dollar. Friday is the quarter-end for U.S. investment banks and
some hedge funds and that may also have led to profit-taking on
the dollar.
"A three-day weekend is coming up and some players are opting
to shed long positions on the dollar with geopolitical risks in
the air," said Joseph Kraft, head of Japan capital markets at
Dresdner Kleinwort.
The dollar eased 0.4 percent from late U.S. trading on
Thursday to 109.07 yen <JPY=>. The euro climbed 0.3 percent to
$1.4744 <EUR=>.
However, the greenback is still poised to show gains of 5.5
percent against the euro this month, its biggest gain against the
euro since the single currency was launched in 1999.
Since late July, the dollar has benefited from growing signs
that economic weakness has spread beyond the United States.
U.S. gross domestic product grew at a 3.3 percent annual rate
in the second quarter compared with an initial estimate of 1.9
percent, the government said on Thursday.
In contrast, data released by the Munich-based think tank Ifo
earlier this week showed that German business morale fell to a
three-year low, or the weakest since June 2005.
"When considering how bad the economy really is, it would not
be a surprise if the euro were to fall further," said Kimihiko
Tomita, head of foreign exchange for State Street Global Markets
in Tokyo, adding that the euro could eventually fall below $1.40.
Sterling rose 0.2 percent to $1.8315 <GBP=D4> amid the
dollar's broad decline on Friday. But with its 7.7 percent
decline in August, it was on track for its biggest monthly loss
since October 1992 -- shortly after Britain was forced to leave
the European exchange rate mechanism.
The pound had hit a two-year low of $1.8240 on Thursday,
after data showed that British house prices posted their biggest
annual fall for 17 years while retail sales saw the steepest drop
since records began a quarter of a century ago.
Currency traders and analysts expect the euro zone August
HICP flash estimates, indices of consumer sentiment, to provide
the euro with near-term direction. The data is due later on
Friday.
The European Central Bank this week quashed talk of a looming
rate cut but a weak sentiment index could revive such
expectations for monetary easing.
(Editing by Michael Watson)
