* Investors look past U.S.-China trade dispute
* Euro climbs to fresh 2009 high vs the dollar
* Dollar index swings between gains and losses
(Recasts, adds comment, updates prices)
By Nick Olivari
NEW YORK, Sept 14 (Reuters) - The dollar fell against the
euro on Monday, erasing earlier gains, as investors looked past
a United States-China trade dispute and took on more risk.
U.S. stocks pared losses <.N>, reflecting higher risk
appetite and reduced safe-haven demand for the dollar as
investors stuck to the recent theme of changes in risk
tolerance driving dollar action.
The euro recovered from losses and moved into positive
territory against the dollar on buying of the euro against the
pound, said Kathy Lien, director of currency research at GFT
Forex.
She said the move into the euro at the expense of sterling
followed a Moody's report that the ratings company's outlook
for UK banks remained negative with a negative credit outlook
for the next 12 to 18 months, reflecting weakness in the
domestic economic environment. [].
"The correction in the euro (this morning) should not be
mistaken for a dollar bottom," said Lien.
The euro was up 0.4 percent on the day at $1.4619 <EUR=>
after climbing as high as $1.4652. The euro rose 0.7 percent
against the pound to 0.8812 <EURGBP=>.
Sterling fell 0.4 percent against the dollar <GBP=> to
$1.6584.
The dollar index, which measure the dollar against a basket
of six currencies <.DXY>, swung between gains and losses on the
day but last traded up 0.1 percent at 76.677, marking the first
day of gains in seven sessions.
CHINA DISPUTE
Early trading was dominated by the China/U.S. trade dispute
after President Barack Obama on Friday duties on tire imports
from China that would put additional duties of 35 percent on
Chinese-made tires from Sept. 26.
China struck back, announcing its own anti-dumping
investigations of U.S. motor vehicles and chicken products.
[]
The dispute raised concern and increased uncertainty that
the fragile global economic recovery could be derailed, adding
to the dollar's allure as a safe haven while keeping investors
wary of risky positions.
"The escalation of protectionism from the U.S. will concern
many, particularly due to its potential impact on the global
recovery," Camilla Sutton, a currency strategist at Scotia
Capital in Toronto, said in a note to clients.
While the latest tension between Washington and Beijing
initially lowered risk demand on Monday, strategists said it
was unlikely to put a lasting hole in the market's appetite for
risk over the longer term. That will lead to ongoing pressure
on the dollar.
AUSSIE, KIWI FALTER
The Australian dollar fell 0.4 percent to $0.8603 <AUD=>,
retreating from Friday's one-year high. The New Zealand dollar
slid 1.1 percent to $0.6995 <NZD=>, hurt by an unexpected fall
in New Zealand retail sales for July. []
But many analysts said the dollar's rebound was temporary,
as the greenback would be undermined by falling Treasury yields
and a view it was replacing the yen as a funding currency.
Talk of Asian central banks diversifying from U.S. dollars
into other currencies and assets, including gold, contributed
to dollar-selling last week.
At the same time, the dollar's sell-off last week left the
market with its biggest net short position in the currency in
more than a year, and some analysts said this may keep
investors cautious about pushing it much lower for now.
Against the yen, the dollar rose 0.2 percent 90.89 yen
<JPY=>, pulling back from an early fall to 90.18 yen, its
lowest since February.
Traders said large options barriers around 90.00 yen and
90.50 yen would likely slow the yen's gains versus the dollar.
Japan's Vice Finance Minister Yasutake Tango said on Monday
officials are watching currency moves closely but declined to
comment on specific levels. [].
(Additional reporting by Naomi Tajitsu in London; Editing by
Dan Grebler)
