* Dollar retreats after biggest rally in 3 weeks
* Euro back in middle of $1.48-$1.51 options range
* BoE minutes seen as relatively dovish, sterling hit
(Updates prices)
By Jamie McGeever
LONDON, Nov 18 (Reuters) - The dollar weakened broadly on
Wednesday as dealers took profits on the currency's biggest rise
in three weeks the previous session and pushed the euro back to
the middle of its range of the last fortnight.
Sterling held its ground against the weak dollar but slid
against the euro, as traders interpreted the minutes from the
Bank of England's last policy meeting as slightly dovish.
The dollar index, a broad measure of its value against six
major currencies, fell back toward the 15-month low hit on
Monday as the impact of U.S. Federal Reserve Chairman Ben
Bernanke's rare comments on currencies faded.
Bernanke's rare venture into dollar rhetoric on Monday,
which was later echoed by other Fed officials and European
Central Bank President Jean-Claude Trichet, had pushed the euro
down two cents toward $1.48 on Tuesday.
But most dealers say the dollar's longer-term declining
trend is intact because although the Fed may be in the very
early stages of withdrawing its huge stimulus measures -- it
said on Tuesday it will pare back its discount window borrowing
facility -- it is still nowhere near raising interest rates.
"It's unwise to ignore what he had to say. There have been
quite clear signals from central bankers in developed and
developing economies that further downdraft in the dollar is
generally unwelcome, and that's making the market fairly
cautious," said Rob Minikin, strategist at Standard Chartered.
"But the market largely lacks direction (right now), and is
reduced to range trading," he said, noting in particular the
euro's return to the middle of the $1.48-$1.51 area.
At 1230 GMT the dollar index was down half a percent on the
day at 74.97, after gaining 0.6 percent on Tuesday, its biggest
one-day rise since Oct. 26. On Monday it struck a 15-month low
of 74.679.
The euro was up 0.6 percent at $1.4955, up a cent and a half
from Tuesday's intraday low of $1.4806. Dealers said the rebound
meant a large $1.48-$1.51 "double no touch" options structure
rolling off on Friday remained alive.
The dollar was down a quarter of a percent against the yen
at 89.10 yen, back within sight of its one-month low of 88.73
yen struck on Tuesday.
MPC MINUTES SHOW SPLIT
Sterling was down slightly against the dollar at $1.6800,
while the euro was up 0.6 percent at 88.98 pence. Technical
support at the 100-day moving average 88.43 pence held firm, and
the euro broke back above the 200-day moving average at 88.66
pence.
The minutes of the BoE Monetary Policy Committee's Nov. 4-5
meeting showed a three-way split, with seven of its nine members
voting to expand the bank's quantitative easing programme by 25
billion pounds to 200 billion pounds.
But perhaps the biggest surprise was the discussion on
potentially cutting the rate of remuneration it pays on bank
reserves in the future. This could effectively serve to ease
policy as it would encourage banks to lend more.
"Any hopes for an MPC-related boost to sterling is gone,"
said Daragh Maher, deputy head of FX strategy at Calyon, adding,
however, that the downside to sterling may also be limited.
The next focus for traders will be U.S. inflation data for
October at 1330 GMT. The figures may be of even more interest in
light of Bernanke's comments this week on the dollar and how it
relates to imported inflation and the Fed's mandate.
"The Fed's relatively sanguine view on the dollar (although
acknowledgement that it is an input into their monetary policy
decision makings), coupled with the belief that asset prices are
not forming another bubble, should provide a green light for
recent trends to continue," said Lauren Rosborough, senior
currency strategist at Westpac in London.
"That said, some markets remain wary and on a technical
basis, the 'bull' trade is not as strong as it was," she said.
Traders also digested U.S. President Barack Obama's visit to
China, where he had talks with Premier Wen Jiabao on Wednesday,
although few expect any near-term changes in Beijing's foreign
exchange policy.
(Editing by Ron Askew)
