* RBA keeps rates at 3 pct and drops easing bias, as expected
* Euro faces selling on profit-taking
* Sterling retreats from multi-month highs
By Satomi Noguchi
TOKYO, Aug 4 (Reuters) - The Australian dollar trimmed
earlier gains but held firm near 10-month highs against the
dollar and the yen on Tuesday after the Reserve Bank of Australia
kept interest rates unchanged, as widely expected, and backed
views for eventual rate hikes later this year.
The RBA dropped mention of scope for further monetary easing
in a brief statement following its monthly policy meeting.
The central bank went so far as to say the global economy is
stabilising and downside risks have diminished, although it also
said its present accommodative setting is appropriate.
The Australian central bank held its interest rates unchanged
at a record low 3.0 percent.
In contrast, the euro fell and sterling erased earlier gains
to over nine-month highs as investors took profits from strong
rises in those currencies.
"The RBA's comment supported market views that Australia may
see a rate hike within this year," said a senior trader for a
Japanese trust bank.
"Hedge funds and CTAs are all in the same trade in which they
buy stocks, oil and the Aussie," said the trader, adding that
their trades are based on hopes for an economic recovery.
The Australian dollar was nearly flat from late U.S. trade at
$0.8427 <AUD=D4>, triming earlier gains to $0.8471 on the Reuters
dealing system, the highest since late September.
It rose above 80.80 yen earlier and hit 10-month peaks before
trading at 80.10 yen <AUDJPY=R>, nearly unchanged on the day.
The dollar edged up but stayed near its lowest level this
year against a basket of currencies, as bullish global stock
markets and upbeat economic data lifted investor risk appetite,
denting the greenback's safe-haven appeal.
The dollar index <.DXY>, a gauge of the greenback's
performance against six other major currencies, was flat at
77.649. It fell as far as 77.451 the previous day, its lowest
since Sept. 29.
The euro fell 0.2 percent to $1.4389 <EUR=>, still not far
from this year's high of $1.4445 hit on trading platform EBS on
Monday.
Against the yen, the euro lost 0.3 percent to 136.90 yen
<EURJPY=R> after earlier rising as high as 137.70 yen on EBS, its
highest since mid-June.
The dollar also lost 0.2 percent to 95.10 yen <JPY=>.
Sterling stabilised at $1.6942 <GBP=D4>, up 0.1 percent on
the day after falling from $1.7005 hit earlier in the day on the
Reuters dealing system, its highest in more than nine months.
Earlier in the day, the New Zealand dollar rose to $0.6712,
its highest in 10 months.
Traders said gains in the New Zealand dollar and sterling
were also supported by positive manufacturing reports from the
United States, Europe and China on Monday that boosted hopes for
the global economy.
"Expectations for a global economic recovery were boosted
further after the series of upbeat data," said Tomohiro Nishida,
treasury department manager at Chuo Mitsui Trust and Banking.
"The market will likely keep its risk-taking stance but we
may see some correction as we get closer to Friday's U.S.
employment report," he said.
(Additional reporting by Kaori Kaneko; Editing by Michael
Watson)
