(Repeats to additional clients)
* Dollar rebounds, stocks trim gains
* U.S. data reinforces expectations of Fed easing
* Investors await G20 meeting, earnings reports
* Caterpillar, other U.S. companies report upbeat results
(Updates with more on G20)
By Manuela Badawy
NEW YORK, Oct 21 (Reuters) - The dollar rebounded from
earlier losses on Thursday amid questions about the extent of
the Federal Reserve's economic stimulus measures, while world
stocks pared gains in tandem with the U.S. currency's
turnabout.
U.S. data on jobless claims and regional business activity
reinforced expectations that the Federal Reserve will provide
another round of stimulus to boost the economy.
New U.S. claims for unemployment benefits fell more than
expected last week but not enough to suggest much improvement
in the labor market, while the Philadelphia Federal Reserve
Bank's October business conditions index rose less than
expected.
The data "means that the Fed still has some work to do.
They need to take some more precautions against the downside
risk to the economy," said Mark Vitner, senior economist at
Wells Fargo Securities in Charlotte, North Carolina.
The dollar's volatility came just ahead of Friday and
Saturday meetings in South Korea of the Group of 20 finance and
central bank chiefs, who will try to hammer out an agreement to
manage currency, trade and macroeconomic imbalances.
China's latest data showed its economy was far from
overheating, suggesting Beijing's rate hike this week may be
enough for now to placate trading partners demanding a stronger
yuan to reduce trade imbalances. []
U.S. earnings remained in the spotlight, with Caterpillar
Inc <CAT.N> reporting strong quarterly results and raising its
full-year revenue forecast. []
The Dow Jones industrial average <> advanced 37.69
points, or 0.34 percent, to 11,145.66 -- sharply off its
session high at 11,213.54. The Standard & Poor's 500 Index
<.SPX> rose 2.00 points, or 0.17 percent, to 1,180.17, below
its session high at 1,189.43. The Nasdaq Composite Index
<> added 1.36 points, or 0.06 percent, to 2,458.76, also
well off its session high at 2,482.14.
Stocks generally advanced, renewing a rally that has been
under way since September.
The MSCI all-country world index <.MIWD00000PUS> was up
0.09percent on the day with its emerging market component
<.MSCIEF> leading the way, up 0.35 percent. MSCI's emerging
market index has gained 12 percent this year.
European stocks rallied, ending at their highest closing
level in six months, propelled by a batch of upbeat quarterly
results from bellwethers such as Nokia <NOK1V.HE>. The
FTSEurofirst 300 <> index of top European shares ended
0.6 percent at 1,093.24, the index's highest close since late
April.
DOLLAR VOLATILITY
Currency volatility rippled through markets after comments
from U.S. Treasury Secretary Timothy Geithner late on Wednesday
in which he said major currencies were in balance. The dollar
jumped initially but the rally faded as investors focused on
the impact of a renewal of quantitative easing by the Fed.
But the size, shape and timing of the Fed's move have left
investors guessing, and nearly two months of speculation has
given them plenty of time to sell the dollar, pushing it to
extreme levels against some major currencies.
"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," said Taisuke
Tanaka, FX strategist at Nomura Securities in Tokyo.
By midday, though, the dollar had managed a modest rebound
against the euro and a basket of major currencies.
A G20 source, with direct knowledge of meeting
deliberations, said G20 officials are unlikely to reach an
accord rejecting currency devaluations and capping current
account balances. The source made the comment after U.S.
proposals ran into stiff opposition from several countries,
including India and China.
The euro <EUR=> was down 0.2 percent at $1.3932 against the
dollar as investors sold some euros in volatile trading.
The U.S. Dollar Index <.DXY> was up 0.28 percent at 77.385
from a previous session close of 77.171. Against the Japanese
yen, the dollar <JPY=> was up 0.16 percent at 81.26 from a
previous session close of 81.120.
The U.S. currency has lost more than 10 percent against
major currencies over the past four months.
While traders were far from convinced that G20 minsters
would solve once and for all their exchange-rate disagreements
at a weekend meeting, some said there was reluctance to take
extreme positions one way or the other.
"There's so much uncertainty, and I really think we'll see
a lot of position jockeying ahead of the weekend," said Greg
Salvaggio, vice president of trading at Tempus Consulting. "I
wouldn't be surprised to see some dollar strength ahead."
U.S. government debt prices slipped on light volume as
traders await the Fed's decision.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 12/32, with the yield at 2.525 percent. The 2-year U.S.
Treasury note <US2YT=RR> was down 1/32, with the yield at
0.3588 percent. The 30-year U.S. Treasury bond <US30YT=RR> was
down 17/32, with the yield at 3.922 percent.
In energy and commodities markets, crude oil <CLc1> fell
$2.00, or 2.4 percent, to $80.54 per barrel following another
build in U.S. crude oil stocks last week, and spot gold
<XAU=>fell $14.50, or 1.08 percent, to $1,330.80 an ounce.
(Reporting and Writing by Manuela Badawy; Additional reporting
by Richard Leong, Lucia Mutikani, Steven C. Johnson and Rodrigo
Campos in New York; Editing by Kenneth Barry and Jan Paschal)
