* Dollar boosted briefly on Geithner comment on majors
* But short-covering fades as dollar sellers appear
* Market watching G20 finmins meeting for FX discussion
By Charlotte Cooper
TOKYO, Oct 21 (Reuters) - The dollar rose on Thursday on
short-covering after comments by Treasury Secretary Tim Geithner
that major currencies were roughly in alignment, but tempered its
gains ahead of a G20 meeting likely to debate currency policies.
The greenback has been under heavy selling pressure for
weeks, pushed down by expectations of further quantitative easing
by the Federal Reserve to boost a sluggish U.S. recovery, and the
market has generally become short dollars in anticipation.
It held mild gains against the euro and a basket of
currencies but struggled against the yen, holding close to a
15-year low of 80.84 yen <JPY=> set on Wednesday.
Speculation of a grand bargain by the Group of 20 to
rebalance the global economy is swirling, with G20 finance and
central bank chiefs meeting on Friday in South Korea to discuss a
a common path on managing currency, trade and economic imbalances
ahead of a leadership meeting in Seoul next month.[]
Analysts said the market would watch closely for signs on how
discussions were going.
"If we hear divergent comments, that will be more worrying,"
said Robert Ryan, FX strategist at BNP Paribas in Singapore.
Washington is pressing Beijing to let the yuan appreciate
faster, and talk of competitive currency depreciation has flared
as developed countries keep monetary policy easy to shore up
sluggish growth but capital flows in search of better yields push
up currencies in faster growing emerging economies.
The Wall Street Journal quoted Geithner as saying he would
use the weekend meeting to advance efforts to rebalance the world
economy and move toward norms on exchange rate policy.
He divided currencies into three categories, with the first,
including China's yuan, undervalued by any measure, while the
second were of emerging economies with flexible exchange rates
that intervene or impose taxes.
The third was the major currencies, "which are roughly in
alignment now", a comment the WSJ said suggested he saw no reason
for the dollar to fall further against the euro and yen.
The euro, which fell as far as $1.3872, later recovered to
$1.3900 as the market examined the comments more closely, but was
still down 0.4 percent on the day.
The dollar index <=USD><.DXY> rose 0.4 percent to 77.459,
holding off a 10-month low of 76.144 marked last week.
Taisuke Tanaka, FX strategist at Nomura Securities, said
these and other recent remarks by Geithner stressing the U.S. was
not pursuing a deliberate policy of devaluing the dollar were
likely intended to help Washington's negotiating position at the
G20.
"If they urge China to revalue the yuan, they might be told
that the dollar's weakness is the problem," Tanaka said.
"Since it is clear that the direction is toward an expansion
of quantitative easing (in the United States), it is hard to
expect a sustained rebound in the dollar," he said.
The dollar rose as far as 81.84 yen <JPY=> but quickly
retreated to 81.20 yen, up just 0.1 percent on the day. Early on
in the session it had dipped to 80.98 yen, not far off its latest
15-year low and nearing a record low at 79.75 yen set in 1995.
Its brief run higher met with selling from Japanese exporters
and Asian and European banks, traders said, with some noting its
tight trading range in recent weeks had put off short-term
speculators, who preferred more active pairs such as euro/dollar
or Aussie/yen.
Traders reported talk of stop loss sell orders at 80.80 yen
and 80.50 yen but also of an institutional Japanese investor's
bids below 81 yen.
The market is wary that Japanese authorities could intervene
to slow the yen's rise again, after they did so on Sept. 15,
selling yen for the first time in more than six years.
(Additional reporting by Masayuki Kitano and Yoko Matsudaira;
Editing by Joseph Radford)
