* Swiss franc underpinned by Middle East tensions
* Dollar index breaks below channel support
* Dollar/yen subdued after failing to break 84.00
* Aussie upside seen limited after hitting top-end of range
By Ian Chua and Hideyuki Sano
SYDNEY/TOKYO, Feb 18 (Reuters) - The Swiss franc held near
two-week highs on Friday, having powered higher on mounting
Middle East tensions, while the U.S. dollar lost steam, putting
its rebound this month from a three-month low at risk.
The Swiss currency, traditionally sought in times of
heightened geopolitical tension, stayed near two-week highs
versus the dollar and euro as unrest spread across the Middle
East and North Africa.
Anti-government protesters from Bahrain to Iran were hoping
to emulate those who toppled veteran leaders in Egypt and
Tunisia. []
The dollar stood at 0.9505 francs <CHF=>, having fallen as
low as 0.9474 francs on Thursday, its lowest in about two weeks,
while the euro fetched 1.2922 francs <EURCHF=R>, having plumbed
1.2890 francs on Thursday, also a two-week low.
The dollar was also broadly weaker against a basket of major
currencies as U.S. bond yields declined slightly and expectations
of a Federal Reserve rate hike failed to gain momentum.
A surprisingly large increase in initial jobless claims
signalled wages were unlikely to pick up any time soon, reducing
expectations of a rate hike by the Federal Reserve this year.
The dollar index , which tracks the greenback's performance
against a basket of major currencies, dipped to a one-week low of
77.921 before edging back to 78.001 <.DXY>.
It has broken below a channel support line connecting its
three-month low on Feb. 2 and lows on Feb. 9-10, suggesting its
recovery from the Feb 2. low is at risk.
Immediate support comes in at 77.88, the 50 percent
retracement of the Feb. 2 to Feb. 14 rise, a break of which could
open the way for a test of the Feb 2. low of 76.881.
LITTLE FROM G20?
"As long as the dollar index holds above the Feb 2. low, it
will be in a holding pattern," said Ayako Sera, market strategist
at Sumitomo Trust and Banking, adding that the dollar's fate
hinges on Fed policy in the long run.
The Fed's chief, Ben Bernanke, will be speaking in Paris at
1300 GMT on Friday ahead of a meeting of G20 finance ministers
and central bankers on Friday and Saturday.
Traders expect little from the G20 meeting.
"I don't think the upcoming G20 meeting will produce many
market-moving factors, so currencies are expected to stay in
current ranges," said Masanari Takada, foreign exchange
strategist at Nomura Securities.
The euro touched a one-week high of $1.3629 <EUR=>.
"You could attribute some of the euro's gains to lower U.S.
yields," said a trader at a Japanese bank,
"But objectively speaking, it's difficult to justify the
euro's spike as there aren't too many supportive factors for the
currency at the moment. Some players were squaring positions
ahead of the U.S. three-day weekend," he added.
The dollar also lost momentum against the yen. The greenback
traded at 83.35 yen <JPY=>, having fallen to 83.15 on Thursday,
well off an eight-week high near 84 yen hit on Wednesday.
Traders said heavy offers from Japanese exporters as well as
repatriation of earnings by Japanese companies ahead of their
financial year-end next month could block the dollar in the 84-85
yen area.
But some speculators and leveraged funds are still caught in
yen long positions and if they unwind those positions that could
help the dollar break through those resistance levels, said Osamu
Takashima, chief Japan FX strategist at Citibank.
Broad weakness in the dollar and ongoing strength in
commodity prices helped to keep the Aussie near a one-week high.
It traded at $1.0125 <AUD=D4>, near Thursday's one-week high of
$1.0131.
But some market players are concerned that the currency is in
for a correction after a strong rally since the middle of last
year.
"The market was well short the Aussie with less liquidity in
New York ahead of the long weekend. But now that we're at the
high end of the range, I'd look to play from the short side," a
trader at a U.S. investment bank said.
Recent U.S. data showed long Australian dollar <AUD=D4>
positions have jumped to the highest level since April 2010.
[]
Back then, the Aussie traded sideways for much of the month
but subsequently fell more than 12 percent and touched its lowest
level of the year in May.
Some market players think a lot of good news is baked into
the current exchange rate and the weight of positions may start
to impact the currency. []
(Additional reporting by Shinichi Saoshiro, Chikafumi Hodo in
Tokyo, Masayuki Kitano in Singapore, Reuters FX analyst Rick
Lloyd in Singapore; Editing by Edmund Klamann)
