* Investors trim short dollar positions but weakness intact
* Euro slips vs dollar, earlier climb loses momentum
* Dlr/yen near pre-intervention levels, BOJ awaited
* Dlr falls to 2-1/2 yr low vs Swiss Franc
(Updates prices)
By Naomi Tajitsu
LONDON, Oct 4 (Reuters) - The dollar rose on Monday,
recovering earlier losses as traders cut bets the currency will
weaken, which have been piling up on speculation the Federal
Reserve may further ease U.S. monetary policy.
The euro retreated against the dollar as investors and
speculators trimmed long positions in the single currency after
it hit a 6-1/2-month high above $1.38 earlier in the session.
Against the yen, the dollar hovered near a 15-year low, fuelling
talk Japan may re-enter the market to weaken its currency.
This week sees the release of crucial U.S. jobs data while
the central banks of Australia, the euro zone, Japan and the
United Kingdom hold policy meetings. The International Monetary
Fund and Group of Seven finance ministers also meet this week.
Given these risks, analysts said investors were likely to
trim their short dollar positions even though many in the market
expect the prospect of more U.S. quantitative easing will
continue to hurt the currency.
"We could see a mild reversal of short positions until the
market drips through the data on Friday, but I don't think the
trend will change. It's still sell the dollar on rallies, but it
just feels the trade (to sell dollars) is getting crowded," said
Paul Mackel, director of currency strategy at HSBC."
Speculative bets against the dollar swelled to $22 billion
in the week to Sept. 28, the highest since at least mid-2008,
Commodity Futures Trading Commission data showed. []
Analysts said the positions appeared overstretched and due a
correction.
The euro <EUR=> was down 0.5 percent to $1.3715, retreating
from a high of $1.3804 with stop-loss selling triggered around
$1.3675 on its way down. Good-sized bids were lined up above
$1.3650 and likely to offer support, traders said.
BOJ MEETS
The euro was unable to hold earlier gains made after China
pledged on Sunday to support a stable euro and not to reduce its
holdings of European government bonds. []
"The fact that the euro didn't go up more on that news
suggests it's looking a bit tired," HSBC's Mackel said.
Traders in London said Asian demand to sell euros was
helping to push it lower, as was an early slide in European
shares <> and M&A-related demand to sell the currency.
This helped push the dollar up against a currency basket.
The dollar index <.DXY> rose 0.25 percent to 78.287, pulling
back from 78.029 hit on Friday, its weakest since January.
Analysts said markets may turn choppy before Friday's U.S.
non-farm payrolls data. Signs the labour market continues to
suffer may ratchet up speculation the Fed will launch more QE
and add to dollar weakness, they said.
Despite Monday's gains, the dollar's downward trend would
remain intact. The dollar fell to its lowest in 2-1/2 years
against the Swiss franc <CHF=>, falling to 0.9705 francs.
"General dollar weakness can play out versus the euro, but
not against the yen," said Ulrich Leuchtmann, currency analyst
at Commerzbank in Frankfurt."As long as there's general dollar
weakness and it trades so close to 83.00 yen, there's always the
chance that Japan will step in."
The dollar <JPY=> traded at 83.25 yen, almost flat on the
day but retreating from 83.88 yen hit in Asian time. Traders
said stop-loss orders were suspected under 83.00 yen.
The Bank of Japan began on Monday a two-day policy meeting
and was expected to extend a cheap fund-supply tool to help
shore up the struggling economy. []
Some market participants said there was speculation any BOJ
stimulus steps may be followed by more yen-selling intervention.
Some analysts expect Japanese authorities to step in to sell yen
if the dollar falls under 83 yen, as they did last month.
(Additional reporting by Anirban Nag)
