(Updates price levels)
* Dollar index at 3-week low, eyes Feb 2 trough
* Euro, sterling helped by rate hike expectations
* Aussie climbs as data points to business investment boom
* Model funds, retail accounts lift Aussie - trader
* Japanese exporters, model funds sell dollar/yen - trader
By Hideyuki Sano
TOKYO, Feb 24 (Reuters) - The Swiss franc hit a record high
against the dollar on Thursday and the U.S. currency remained
under broad pressure on fears that social unrest could spread in
the oil-rich and politically volatile Middle East.
Traders said the dollar appeared to be losing its safe-haven
lustre while the euro and the pound drew support from
expectations that their interest rate advantage could rise
further later this year.
"There may be a realisation that if oil prices rise sharply,
that would hit all the developed countries and in that sense it
effects every major currency the same," said Tsutomu Soma,
manager of foreign bonds at Okasan Securities.
"And if the impact from the Middle East crisis is roughly
equal on each currency, you could argue that currencies with a
yield advantage will benefit at the end of the day," Soma said.
Against the Swiss franc, the dollar fell to a
record low of 0.9274 franc , its slide having intensified
after triggering stop-loss selling below its previous record low
of 0.9301 set at the end of last year.
After trimming some losses, the dollar last stood at 0.9285
franc, down 0.5 percent from late U.S. trading on Wednesday.
Worry about tension in the Middle East is helping the Swiss
franc, a currency that traders often buy at a time of
uncertainty.
"There is no end in sight in the revolts and democratic
movements from North Africa. This is likely to spread," said
Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.
Traders worry that unrest in Libya could spread to bigger
oil producers such as Algeria and Saudi Arabia, which would be
certain to disrupt oil supplies and harm the global economy.
The euro held firm at $1.3766 , up 0.1 percent from
late U.S. levels, hovering just about a cent below its Feb. 2
peak of $1.3862.
Recent hawkish comments on inflation by European Central
Bank officials have raised expectations the ECB will hike
interest rates before the U.S. Federal Reserve.
By contrast, Fed fund futures <#FF:> have been on the rise
since early last week as investors push back the expected timing
of the Fed's lifting of interest rates from the current range of
zero to 0.25 percent.
The British pound moved closer to its recent peak of $1.6279
hit on Feb. 3 and more importantly $1.6300 hit in November, a
break of which could signal a departure from its trading range
of the past few months.
Sterling rose 0.1 percent to $1.6225 .
It had risen as high as $1.6275 on Wednesday after Bank of
England minutes showed one more policymaker voted for an
interest rate rise this month, cementing market expectations
that the central bank will raise rates by June.
DXY HITS THREE-WEEK LOW
The dollar also ceded ground to the yen and the Australian
dollar, falling 0.6 percent against the Japanese currency to
82.06 yen . Traders cited dollar-selling by Japanese
exporters and model funds, as well as some long liquidation.
A support level for the dollar lies near 81.80 yen. That
roughly coincides with the 76.4 percent retracement of the
dollar's rally between early to mid-February and an intraday low
hit on Feb. 8.
The Australian dollar rose 0.3 percent to $1.0050 ,
supported by data showing Australian business investment rose
solidly last quarter, with spending plans for the next couple of
years exceeding even the most optimistic forecasts.
A trader for a European bank said the Aussie gained a lift
due to buying by model funds, as well as retail investors using
electronic trading platforms.
Underscoring the dollar's broad decline, the dollar index,
which measures the dollar's value against a basket of
currencies, fell as low as 77.144 , its lowest in
three weeks and edging closer to its Feb. 2 trough of 76.881.
SMBC's Uno said the dollar's slide in the face of rising
instability in the Middle East is no surprise.
He said the passage of Iranian naval ships through Egypt's
Suez Canal signalled a change in the balance of power in the
region, and the deterrent power of the United States appeared to
be falling.
"The United States, the centre of the world, is wobbling and
that leads directly to a fall in the dollar," he said.
(Additional reporting by Eric Burroughs in Hong Kong, Reuters
FX analyst Rick Lloyd and Masayuki Kitano in Singapore; Editing
by Richard Borsuk)
