* Aussie hits 14-mth high, RBA raises rates to 3.25 pct
* The Independent says proposal to replace US$ for oil trade
* Trader cites dollar selling by Japan exporters, hedge funds
By Masayuki Kitano
TOKYO, Oct 6 (Reuters) - The dollar fell on Tuesday after a
British newspaper said Gulf Arab states were in secret talks to
end the use of dollars in oil trading, while the Australian
dollar jumped after its central bank raised interest rates.
The additional pressure on the greenback comes on top of
recent weakness from market expectations that the U.S. Federal
Reserve will not rush to raise interest rates and from the
growing view that it has become a funding currency for carry
trades.
The dollar fell broadly, with the Australian dollar rallying
to a 14-month high <AUD=D4> of $0.8876 after the Reserve Bank of
Australia raised interest rates by 25 basis points to 3.25
percent, becoming the first of the Group of 20 central banks to
raise rates as the global financial crisis eases. []
The New Zealand dollar also hit a 14-month high, rising to
$0.7357 <NZD=D4>.
"In the United States, there is an ample supply of money,
while Australia has started to tighten policy and the economy is
doing well," said Yuichi Hojo, director of FX distribution for
UBS in Tokyo.
"There might be a pullback in the next day or two, but viewed
from the longer-term, it seems to be in an uptrend," Hojo said,
referring to the Australian dollar.
Britain's The Independent newspaper said that Gulf Arab
states were in secret talks with Russia, China, Japan and France
to replace the U.S. dollar with a basket of currencies in the
trading of oil. []
It said the proposal was for trade in crude oil to move over
nine years to a basket of currencies including the Japanese yen
and Chinese yuan, the euro, gold and a new, unified currency
planned for nations in the Gulf Co-operation Council, including
Saudi Arabia, the United Arab Emirates, Kuwait and Qatar.
DOLLAR RETREATS
"This is U.S. dollar negative news which is moving markets
and shows that central banks not just in Asia are looking to
diversify away from the dollar," said Jonathan Cavenagh, currency
analyst at Westpac.
"This looks to be a very long term thing with a few hurdles
to cross," he said, adding that European authorities would likely
be reluctant to agree to such an idea since euro zone
manufacturers are sensitive to exchange rate moves.
Masashi Hashimoto, senior analyst at Bank of Tokyo-Mitsubishi
UFJ, said any such moves among Gulf Arab states was unlikely to
occur suddenly, adding that the idea of replacing the dollar in
oil trading also contained risks for oil producers.
"They are probably holding most of what they have accumulated
so far in dollars, even if they have conducted some
diversification into the euro," Hashimoto said.
"Just like China, I think they may be stuck in a dollar trap.
They could end up eroding the value of their assets," he said.
The euro rose 0.5 percent to $1.4722 <EUR=>.
The dollar fell 0.7 percent against the yen to 88.91 yen
<JPY=>, edging back toward an eight-month low of 88.23 yen hit on
trading platform EBS last week.
Earlier, Japanese Finance Minister Hirohisa Fujii said he had
no comment on foreign exchange rates, adding that he told the G7
that the world economy must not engage in competitive
devaluations. []
Asked about the story in The Independent, Fujii said he was
not aware of the report.
The dollar dipped against a basket of currencies, and stood
at 76.322 <.DXY>, inching back in the direction of a 13-month low
of 75.827 hit in late September.
A trader for a major Japanese brokerage said the dollar was
also dragged lower against the yen due to dollar selling flows
from hedge funds and Japanese exporters.
"I don't get the sense that people are selling just because
of this," the trader said, referring to the story in The
Independent.
Market players probably decided to sell the dollar against
the yen, after they saw the dollar's failure to rise above 90.00
yen the previous day, the trader said.
(Additional reporting by Anirban Nag in Sydney and Charlotte
Cooper in Tokyo)
