* Dollar steadies as commodity currencies, stocks stall
* Profit-booking on GBP, NZD and CAD vs dollar
* But dollar's downtrend expected to resume
By Charlotte Cooper
TOKYO, Oct 21 (Reuters) - The dollar stabilised on Wednesday
with the help of investors taking profits on rising
commodity-linked and higher-yielding currencies, after it was
pushed to a 14-month low against a basket of currencies the
previous day.
Traders said investors had been cashing in gains in the
Canadian and New Zealand dollars, which this month hit their
strongest levels in about 15 months, and in sterling, pushing
them down about 0.2 percent against the greenback.
The move helped the dollar climb further off a 14-month low
against the euro after the single European currency failed to
breach a psychological barrier at $1.50 the previous day.
The dollar also got some support from profit-taking in Asian
currencies, after markets in Brazil fell on a new government tax
on foreign investments aimed at stopping the real from gaining.
[]
The Bank of Canada killed talk of an early rate hike on
Tuesday, warning that favourable economic developments were being
undermined by the Canadian dollar's strength and sending the
currency down sharply. []
The move spread to other pairs although comments by New
Zealand's central bank chief Alan Bollard that a high currency
was not necessarily an obstacle to raising the cash rate gave the
kiwi a brief lift. [].
"The BOC's commitment to keep rates low until well into
next year weighed on the rest of the (growth) proxies," said Sue
Trinh, a currency strategist at RBC Capital in Sydney.
"Besides, stocks were also struggling, offering the U.S.
dollar support and tempering its fall."
The dollar index <=USD> edged down 0.1 percent from late New
York levels but was steady at 75.511, above a 14-month low of
75.103 hit on Tuesday.
The Australian dollar retreated from Tuesday's 14-month high
above $0.9300 to $0.9223 <AUD=D4>, while the kiwi held steady
at $0.7505, having lost 1 percent on Tuesday. It briefly rose as
high as $0.7525 after Bollard's comments.
The Canadian dollar <CAD=> held firm at C$1.0474 per dollar,
after slipping to C$1.0517 and having tumbled 2 percent the
previous day.
The euro fell 0.1 percent to $1.4929 <EUR=>. It hit a
14-month high of $1.4994 the day before.
The dollar got some respite from softer stocks. Wall Street
ended lower and Asian markets were in the red after disappointing
U.S. housing and inflation data outweighed strong results from
bellwethers Apple <AAPL.O> and Caterpillar <CAT.N>. []
JUST A PAUSE
The dollar has been under pressure this year as investors
brace for record low U.S. interest rates well into 2010 and
questions mount about its status as the world's main reserve
currency.
It has also been hurt by talk that it is fast becoming the
new funding currency for carry trades, replacing or at least
accompanying the yen.
It slid 0.1 percent to 90.69 yen <JPY=>, with support
seen around 90 yen and Japanese exporters expected to sell into
rallies up to 91.00.
San Francisco Federal Reserve President Janet Yellen said
the time for tightening in the United States was still several
months away, echoing the cautious mood among policymakers there
about the pace of the economic recovery. []
Policy makers worldwide are watching the dollar's fall push
up their own currencies to the possible detriment of economic
recovery, with France joining Canada on Tuesday in expressing
concern. []
But policy makers also want to see a correction in imbalances
between exporter and importer nations which contributed to the
global economic crisis, corrections which some say will require
the greenback to fall.
Tohru Sasaki, chief FX strategist Japan at JP Morgan in
Tokyo, expected more dollar weakness due to the U.S. current
account deficit and lack of flows into the U.S. due to its low
yields.
"It's understandable if they are worrying about dollar
weakness but it's not easy to stop this trend because it's not a
speculative movement," Sasaki said.
The Bank of England releases minutes of its latest policy
meeting later in the day. At the meeting held on Oct. 7-8 it held
rates at a record low of 0.5 percent and kept its 175 billion
pound ($287 billion) asset-buying programme in place.
Sterling came under pressure on Tuesday after Bank of
England Governor Mervyn King said Britain was likely to return to
positive growth in the second half of this year, but output would
remain below its year-earlier level for some time.
[]
Sterling <GBP=D4> edged up 0.1 percent to $1.6407 after
dipping to $1.6346 earlier. It has risen 4 percent in a week.
(Additional reporting by Anirban Nag in Sydney and Satomi
Noguchi in Tokyo; Editing by Michael Watson)
