* Short dollar positions trimmed, but weakness intact
* Euro slips vs dollar, earlier climb loses momentum
* Dlr/yen nears pre-intervention levels, BOJ awaited
* Dlr falls to 2-1/2 yr low vs Swiss Franc
(Recasts, updates prices, adds details)
NEW YORK, Oct 4 (Reuters) - The U.S. dollar rebounded on
Monday, recovering from early declines, as renewed concerns
about the financial stability of peripheral euro zone countries
hit the European single currency.
Bad news from Ireland, Portugal and Greece overshadowed
concerns the Federal Reserve may further ease U.S. monetary
policy, a move that would hurt the U.S. currency.
Ireland's economy will crawl to a virtual halt this year,
defying government hopes of modest growth, the Irish central
bank said on Monday, underlining the challenge the country's
leaders face to revive its fortunes. [].
Investors and speculators trimmed long positions after the
single currency hit a 6-1/2-month high above $1.38 on
electronic trading platform EBS, analysts said.
Against the yen, the dollar hovered near a 15-year low,
fuelling speculation Japan may re-enter the market to weaken
its currency.
"The euro has come a very long way in a very short period
of t1ime and certainly Ireland and the peripheral euro zone
country issues have not gone away," said Omer Esiner, chief
market analyst at Commonwealth Foreign Exchange Inc in
Washington. When those issues "come back in the spotlight, they
are used to take some profits on the euro."
The euro <EUR=> was down 0.8 percent to $1.3681, retreating
from a high of $1.3809 on EBS <EUR=EBS> with stop-loss selling
triggered around $1.3675 on to the session low of $1.3666 on
EBS. Good-sized bids were lined up above $1.3650 and likely to
support, traders said.
Portugal's Finance Minister Fernando Teixeira dos Santos
said on Monday the country has to consolidate its finances
swiftly and in a sustainable manner and all political parties
have to act together to approve new austerity measures and
avert a debt crisis. []
That news coincided with Greece's draft budget on Monday
which forecasts the economy will contract 2.6 percent next year
after a 4.0 percent slump in 2010, staying in recession for a
third straight year [].
BOJ MEETS
The euro declines helped push the dollar up against a
currency basket. The dollar index <.DXY> rose 0.5 percent to
78.443, up from 78.029 on Friday, its weakest since January.
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.
The euro briefly extended losses against the dollar after
data showed pending sales of previously owned U.S. homes rose
to a four-month high, indicating the housing market was
regaining some stability. [].
The data prompted hope of less need for additional
quantitative easing though its effect was fleeting.
Despite Monday's gains, the dollar's downward trend
remained intact.
The dollar fell to its lowest in 2-1/2 years against the
Swiss franc <CHF=>, falling to 0.9705 francs before recovering
to 0.9730 francs, little changed on the day.
The dollar <JPY=> traded at 83.35 yen, up 0.2 percent, but
retreating from 83.88 yen hit in Asian time on EBS. 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 cited 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 Naomi Tajitsu in London)
(Reporting by Nick Olivari; Editing by Andrew Hay)
