* Dollar index up 0.6 pct at 75.770 <.DXY>
* U.S. stock futures down; banks park funds in Treasuries
* Aussie, kiwi extend losses; on track for 2 pct weekly fall
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By Tamawa Desai
LONDON, Nov 20 (Reuters) - The dollar rose on Friday,
extending the previous day's gains as investors retreated from
riskier assets, taking the shine off higher-yielding currencies
such as the Australian dollar.
Tokyo's Nikkei average fell 0.5 percent on Friday and logged
its first four-week losing streak in over a year after the U.S.
S&P 500 index suffered its worst one-day percentage fall in
three weeks on Thursday. U.S. futures <SPc1> were lower on
Friday.
"Risk aversion seems to be dominating at the moment and may
continue to do so," said Stuart Bennett, currency analyst at
Calyon. "That said, there hasn't been much by way of new
information to induce a fresh wave of uncertainty."
Investors pared dollar short positions, while the greenback
was also supported as banks parked funds into safe-haven assets
such as U.S. government bonds.
Rates on short-dated U.S. government paper fell on Thursday,
with the 2-year bond yield falling to the year's low of 0.68
percent. Three-month bills traded near 1 basis point and
six-month bills fell to near record lows, traders said.
That was largely due to funds booking profits and parking
their cash in U.S. government bonds to "window-dress" their
books ahead of closings at the end of this month and next.
The dollar index was up 0.6 percent on the day at 75.770
<.DXY>, well above a 15-month low of 74.679 touched on Monday.
By 1205 GMT, the euro was down 0.6 percent at $1.4823
<EUR=>, still with talk of double-no-touch options at $1.48-1.51
rolling off later on Friday.
Markets showed little reaction to European Central Bank
Governor Jean-Claude Trichet who said it was too early to
declare the financial crisis was over. []
The yen gained broadly, with the euro at 131.91 yen
<EURJPY=R>, breaking below its 200-day moving average of around
132.10 yen.
The dollar was flat against the yen, but remained under
pressure as short-term speculators tested its downside. It was
at 88.99 yen <JPY=>, still within reach of a six-week low of
88.63 yen hit on trading platform EBS the previous day.
Reaction was muted as the Bank of Japan kept interest rates
at a record low 0.1 percent as expected, and upgraded its
assessment on the economy. That was in contrast to the
government who said the economy had fallen back into mild
deflation.
BOJ Governor Masaaki Shirakawa said there was no change in
the central bank's stance on maintaining very low interest rates
to support the economy. []
"The government's decision to officially state now that the
economy has fallen into deflation is likely an attempt to
increase pressure on future BOJ policy decisions to ease
monetary conditions further," said Lee Hardman, currency
economist at Bank of Tokyo-Mitsubishi UFJ, and that could weaken
the yen next year.
"The government's desire for the BOJ to ease monetary policy
further to combat deflation risks stems also from the fact that
the room for additional fiscal stimulus is limited," he added.
The Australian dollar <AUD=D4> was down 1.2 percent at
$0.9078 while the New Zealand dollar fell 1.4 percent to
$0.7208, both at two-week lows against the U.S. dollar.
They were also both on track for a roughly 3.0 percent
decline on the week.
Activity may be thin next week with a Japanese national
holiday on Monday and U.S. Thanksgiving day on Thursday.
(Additional reporting by Satomi Noguchi in Tokyo; Editing by
Andy Bruce/Ruth Pitchford)
