* Dollar index pulls back from 1-yr low on weak shares
* U.S.-China trade spat dents risk appetite
* Yen hits 7-mth high of 90.18 yen vs dlr <JPY=>, retreats
(Adds data, updates prices)
By Naomi Tajitsu
LONDON, Sept 14 (Reuters) - The dollar gained against most
currencies on Monday as falling global stocks spurred profit
taking and the United States and China became embroiled in their
latest trade spat.
A 1.1 percent fall in European shares <> lifted the
dollar half a percent on the day against a basket of six major
currencies, pulling it away from a one-year low hit last week.
On Friday, U.S. President Barack Obama announced safeguard
duties on tyre imports from China that would put additional
duties of 35 percent on Chinese-made tyres from Sept. 26.
China struck back, announcing its own anti-dumping
investigations of motor vehicles and chicken products from the
United States. []
Some analysts said the row had provided an opportunity to
book profits on last week's rally in currencies considered be
higher-risk, including the euro, sterling and the high-yielding
Australian and New Zealand currencies.
"Risk has come a long way in a short time, and the market
was looking for a reason to pull back and get in at better
levels," said Paul Robson, currency strategist at RBS in London.
He added that while the latest tension between Washington
and Beijing quelled risk demand on Monday, it was unlikely to
put a lasting hole in the market's appetite for risk in the
longer term.
Other analysts said such a row during a time of fragility in
the global economy was keeping investors wary of risky
positions, which was helping to boost the dollar.
"A trade war will not help the global economy and we believe
this news is enough to dent a market positioned for recovery,"
said Chris Turner, head of FX strategy at ING.
By 1110 GMT, the euro was down 0.2 percent on the day at
$1.4538 <EUR=>. It hit a 2009 peak of $1.4636 on trading
platform EBS on Friday. The dollar index <.DXY> was at 77.001,
up 0.5 percent on the day.
Markets shrugged off euro zone industrial production data,
which fell 0.3 percent in July, slightly lower than forecasts,
and employment in the euro zone down 0.5 percent in the second
quarter versus the previous three months. []
Separately, the European Commission forecast the euro zone
economy to contract by 4.0 percent this year -- the same as it
forecast in May. []
AUSSIE, KIWI FALTER
The Australian dollar fell 0.6 percent to $0.8576 <AUD=D4>,
retreating from Friday's one-year high of $0.8677. The New
Zealand dollar slid 1.1 percent to $0.6990 <NZD=D4>, hurt on an
unexpected fall in New Zealand retail sales for July.
But many analysts said the dollar's rebound was temporary,
as the greenback would be undermined by falling Treasury yields
and a view it was replacing the yen as a funding currency.
Talk of Asian central banks diversifying from U.S. dollars
to other currencies and assets, including gold, had also
contributed to dollar-selling last week.
At the same time, the dollar's sell-off last week has left
the market with its biggest net short position in the currency
in more than a year, and some analysts said this may keep
investors cautious about pushing the dollar much lower for now.
On Monday, the dollar inched up slightly to 90.80 yen
<JPY=>, pulling back from an early fall to 90.18 yen on EBS, its
lowest since February.
Traders said large options barriers around 90.00 yen and
90.50 yen would likely slow the yen's gains versus the dollar.
Japan's vice finance minister Yasutake Tango said on Monday
officials are watching currency moves closely but declined to
comment on specific levels. []
(Additional reporting by Tamawa Desai, editing by Chris Pizzey)
