* Euro/dollar hits 1-month high, dollar index falls 0.4 pct
* Aussie/yen rises, commodity FX recovers from China
* Liquidation of cross/yen long positions runs its course
* German 2009 GDP shrinks 5.0 pct
(Adds data, quotes, updates prices)
By Neal Armstrong
LONDON, Jan 13 (Reuters) - The euro hit a one-month high
against the dollar on Wednesday while higher-yielding currencies
trimmed losses from the previous day as investors concluded
China's surprise monetary tightening would not derail growth.
Commodity-linked currencies such as the Australian dollar
regained ground, but the market remained nervous that the
withdrawal of liquidity as economies recover and central banks
focus on inflation risks could prompt investors to unwind
positions in perceived riskier assets.
"Speculation that China will continue to remove some of its
measures will keep the forex market on its toes. No doubt
sentiment will swing between risk aversion and appetite
depending on rhetoric from policymakers," said Stuart Bennett,
currency analyst at Calyon.
By 1216 GMT, the euro had climbed more than half a percent
on the day to $1.4804, according to Reuters data, its highest
since Dec. 16. Traders cited demand from Asian sovereign names
boosting the single European currency.
The euro recovered from a slide early in the European
session after data showed the German economy contracted by more
than expected in 2009. []
The dollar index, which tracks the performance of the
greenback versus a basket of six major currencies, fell around
0.4 percent to 76.605 <.DXY>, its lowest since mid-December.
The yen fell broadly, paring gains made on Tuesday after
China's central bank raised banks' required reserves ratio - a
move which prompted investors to unwind yen-selling positions.
The dollar rose 0.2 percent to 91.16 yen <JPY=>, after
falling to 90.73 yen on Tuesday. The euro was up 0.7 percent to
132.82 yen <EURJPY=R>, after falling 1.4 percent on Tuesday.
The Australia dollar, which fell on Tuesday with other
commodity-linked currencies on fears over Chinese growth,
recovered on Wednesday.
The Aussie climbed 0.8 percent to 84.35 yen <AUDJPY=R>,
after its biggest daily drop in eight weeks on Tuesday.
It also rose 0.5 percent to $0.9250 <AUD=D4>, after falling
more than 1.2 percent on Tuesday, with traders noting sovereign
demand facilitating the move.
Ian Stannard, currency strategist at BNP Paribas in London,
said he remained "cautiously bullish" on commodity currencies in
the near-term, but warned that further signs that China may need
to tighten monetary policy would need to be closely watched.
Chinese inflation data next week would be important, he
said, adding "a strong number would likely heighten market
expectations of more aggressive tightening from China".
U.S. EARNINGS EYED
Sterling touched a near one-month high of $1.6285 after Bank
of England policymaker Andrew Sentance said in a newspaper
interview published on Wednesday the central bank was close to
holding back on stimulus [].
The pound was also boosted after UK industrial production
data came in stronger than expected. []
The Swiss franc briefly dipped against the euro to 1.4804
francs as traders cited talk of bids from the Bank for
International Settlements (BIS), which sometimes acts in the
currency market for individual countries' central banks. The
euro was last up 0.3 percent at 1.4780 francs <EURCHF=>.
Market players will keep an eye on U.S. corporate earnings
and the fallout from a potential U.S. government levy on banks.
The chief executives of Wall Street's biggest firms are
scheduled to testify before Congress about the financial crisis.
(Additional reporting by Tamawa Desai; Editing by Nigel
Stephenson)
