* Dollar up for second straight day as risk appetite fades
* Stocks decline, banks park funds in Treasuries
* High-yielders such as Australian dollar fall
(Updates prices, adds comment)
By Steven C. Johnson
NEW YORK, Nov 20 (Reuters) - The dollar rose for a second
straight session on Friday as investors cut exposure to risky
assets and high-yield currencies ahead of a holiday-shortened
week in the United States.
European and U.S. shares declined while oil, gold and
high-yield currencies such as the Australian dollar also fell
as investors took profits as the end of the year approaches.
The dollar is down some 14 percent since mid-March as signs
of a global recovery prompted investors to favor higher-yield
currencies and assets. Expectations for record low U.S.
interest rates well into 2010 have also hurt the greenback.
"It's been a very good year for a lot of people, and it
makes sense that players are going to square up positions today
ahead of the U.S. holiday and month-end," said Michael
Woolfolk, strategist at BNY Mellon in New York.
U.S. markets will be shut next Thursday for Thanksgiving,
while Monday marks a national holiday in Japan.
The dollar was off highs for the day but still firmer
against most major currencies. The euro fell 0.4 percent to
$1.4858 <EUR=> after touching a two-week low of $1.4800. That
level was the lower end of a hefty double-no-touch option at
$1.48-1.51 that market participants suspected was rolling off
later on Friday.
Against the yen, the dollar slipped 0.1 percent to 88.95
yen <JPY=> while the euro fell below its 200-day moving average
around 132.10 yen <EURJPY=>.
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.
Sterling shed 0.9 percent to $1.6521 <GBP=> and the
Australian dollar lost 0.5 percent to $0.9144 <AUD=>, near an
earlier two-week low. It was headed for a 2 percent decline
this week.
ANXIOUS INVESTORS
Some analysts said investors wanted to see more evidence
that the world economy is back on track before blindly buying
risky assets in the hope of higher returns.[]
European Central Bank President Jean-Claude Trichet said
Friday it was premature to declare the financial crisis over,
as he warned that banks risk becoming addicted to the cheap
money from emergency government stimulus programs and must be
prepared for its withdrawal. []
Andrew Wilkinson, senior analyst with Interactive Brokers,
said some investors "are starting to get cold feet over the
health of asset market rallies, taking the line that stocks
have come too far too soon and that they should -- if only for
safety's sake -- perhaps hold onto their dollars after all."
The dollar index was up 0.5 percent on the day at 75.648
<.DXY>, well above a 15-month low of 74.679 touched on Monday.
Traders said gains in the futures contract of the dollar
index were based on a faulty trade, and the ICE Futures
Exchange said it had canceled trades above 76.50. For more, see
[].
The greenback was also supported as banks parked funds in
safe-haven assets such as U.S. government bonds.
Rates on short-dated U.S. government paper fell on Friday,
with the two-year bond yield at one point falling to the year's
low beneath 0.68 percent. 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.
(Additional reporting by Naomi Tajitsu in London; Editing by
Leslie Adler)
