* Dollar rebounds, stocks edge higher
* U.S. data reinforces expectations of Fed easing
* Investors await G20 meeting, earnings reports
* Caterpillar, other U.S. companies report upbeat results
(Updates with U.S. markets close, Nikkei futures)
By Manuela Badawy
NEW YORK, Oct 21 (Reuters) - The dollar rebounded from
earlier losses in volatile trade on Thursday amid questions
about the extent of the Federal Reserve's economic stimulus
measures, while world stocks edged higher 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. []. Blue chips
McDonald's Corp <MCD.N> and Travelers Cos Inc <TRV.N> helped
lift the Dow after reporting better-than-expected results.
The Dow Jones industrial average <> gained 38.60
points, or 0.35 percent, to close at 11,146.57. The Standard &
Poor's 500 Index <.SPX> added 2.09 points, or 0.18 percent, to
1,180.26. The Nasdaq Composite Index <> rose 2.28
points, or 0.09 percent, to 2,459.67.
Stocks generally advanced, renewing a rally that has been
under way since September.
The MSCI all-country world index <.MIWD00000PUS> rose 0.28
percent on the day with its emerging market component
<.MSCIEF> leading the way, up 0.45 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 rose 0.6
percent to end at 1,093.24, the index's highest close since
late April.
The December futures contract for the Nikkei 225 stock
index <0#NK:> trading in Chicago fell 30 points to 9,385.
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 0.33 percent at $1.3918 from a
previous session close of $1.3964. The euro had earlier
climbed to a high around $1.4050, but failed to sustain gains
above key resistance at $1.40 for a second day this week. It
also came under pressure after U.S. stocks cut gains.
Against the Japanese yen, the dollar <JPY=> was up 0.25
percent at 81.32 from a previous session close of 81.12.
The dollar was up against a basket of major currencies,
with the U.S. Dollar Index <.DXY> up 0.38 percent at 77.461
from a previous session close of 77.171. 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 18/32, with the yield at 2.549 percent. The 2-year U.S.
Treasury note <US2YT=RR> was unchanged with the yield at 0.360
percent. The 30-year U.S. Treasury bond <US30YT=RR> was down
39/32, with the yield at 3.962 percent.
In the energy markets, crude oil <CLc1> fell $1.98, or
2.40 percent, to settle at $80.56 per barrel following another
build in U.S. crude oil stocks last week. Meanwhile, in
commodities trading, spot gold prices <XAU=> fell $20.40, or
1.52 percent, to $1,324.90 an ounce.
(Additional reporting by Richard Leong, Lucia Mutikani,
Steven C. Johnson and Angela Moon in New York; Editing by
Kenneth Barry and Jan Paschal)
