FOREX-Dollar eases as selling of high-yielders pauses

                                
 * Dollar eases after short-covering recedes
                                
 * Higher-yielders rebound after a fall on profit-taking
                                
 * Euro stabilises after biggest fall since early August
                                
 By Satomi Noguchi
                                
 TOKYO, Oct 27 (Reuters) - The dollar eased against a basket
of currencies on Tuesday, trimming some of the previous day's
sharp gains as investor selling of stretched higher-yielding
currencies and the euro paused.
                                
 The euro had its steepest drop since early August on Monday,
falling nearly 1 percent, and the dollar index posted its best
daily gain since September as investors unwound short dollar
positions after a sharp fall in stocks and commodities.
                                
 The euro drew some demand from Asian investors, recovering
from the day's lows, while the Aussie rebounded as some market
players remained doubtful that the low-yielding dollar would
strengthen further.
                                
 But other traders said the dollar may rise more in the near
term as short-term speculators take profits from their bets this
year on risky assets with the approach of their business
year-end, which typically comes in November.
                                
 "Corrective moves to the dollar, which had fallen especially
vs commodity-linked currencies and the euro since February, may
continue ahead of the closing of their business," said Toshihiko
Sakai, a manager for forex trading at Mitsubishi UFJ Trust Bank.
                                
 A rise in U.S. Treasury yields was also a factor to support
the greenback, traders and analysts said.
                                
 The 10-year note yield <US10YT=RR> rose to its highest level
in two months the previous day before rebounding in Asian trade
on bargain hunting. The yield rise came as the market fretted
about a record debt sale this week and about when the Federal
Reserve might start reversing its policy of low interest
rates.[US/]
                                
 The euro <EUR=> edged up from late U.S. levels to $1.4891 but
was well down from a 14-month peak of $1.5064 hit on Monday after
an opinion article in a newspaper published by the People's Bank
of China suggested the Asian giant should lift the share of the
euro and yen in its foreign exchange reserves. [ID:nPEK275970]
                                
 Traders expected chart support for the euro at $1.4850 and
$1.4830, with a break of the latter opening the way to $1.4675.
                                
 The dollar has been a favoured trade to sell against
higher-yielding currencies this year, with the prospect of low
U.S. rates for a prolonged period undermining it.
                                
 Data late last week showed currency speculators increased
their bets against the dollar in the week to Oct. 20 with
the value of net short positions rising to $18.65 billion from
$17.99 billion a week earlier. [IMM/FX].
                                
 That heavy short positioning made investors hesitate to sell
the dollar further, analysts said, creating conditions for a
pullback.
                                
 The dollar index <.DXY>, a measure of the greenback's
performance against six other major currencies, fell 0.2 percent
to 75.924, but above a 14-month low of 74.94 set last week.
                                
 The dollar hit its highest in a month against the yen,
touching 92.33 yen <JPY=> before falling 0.1 percent to 92.12
yen. It hit an eight-month low of 88.01 early in October, not far
off last January's 13-year low of 87.10.
                                
 "For dollar/yen it's tricky, but rising U.S. yields and a
general buyback for the dollar is supportive for dollar/yen and
justifies further liquidation of yen long positions," said
Masafumi Yamamoto, chief FX strategist Japan at Barclays Capital
in Tokyo.
                                
 Traders said dollar selling orders are lined up above
92.30-50 yen, capping it for now. But a rise as high as 94 yen
may be possible, a senior manager for a Japanese securities firm
said.
                                
 The Australian dollar <AUD=D4> rose from Monday's low of
$0.9125 on good support from buyers around that level and was
holding at $0.9180, below last week's 14-month high at $0.9330.
                                
 It is likely to be supported by speculation on whether rates
will move up by 25 or 50 basis points next month, after
Australia's central raised rates earlier in October.
                                
 Investors are likely to stay wary ahead of U.S. consumer
confidence numbers for October and house price index data for
August, both due later in the day. Also, the market is waiting to
see third-quarter U.S. gross domestic product data on Thursday.
                                
 Analysts expect the U.S. economy to expand 3.3 percent in
the third quarter [ECONUS]. Anything lower, like shock GDP
numbers from Britain late last week, could trigger another wave
of selling in riskier assets.
 (Additional reporting by Charlotte Cooper in Tokyo and Anirban
Nag in Sydney; Editing by Michael Watson)