* Dollar extends broad losses, hits 14-month low vs basket
* Weakness on mix of Bernanke, Trichet, RBA, Fujii, stocks
* Euro nears $1.50 but options-related selling caps gains
(Updates prices)
By Jamie McGeever
LONDON, Oct 20 (Reuters) - The dollar hit a 14-month low
against a basket of currencies on Tuesday on a cocktail of
policymaker comments, but options-related buying kept it from
pushing through $1.50 against the euro and 90 yen.
Strength in global stocks, fired by Apple Inc's <AAPL.O>
forecast-beating third-quarter earnings overnight, also fed
traders' appetite to sell dollars for higher-yielding currencies
and assets more closely correlated with economic recovery.
Comments on the euro's strength from an adviser to French
President Nicolas Sarkozy and a report quoting an unnamed
Chinese government source calling for a reversal of the dollar's
slide had limited impact.
Until the market hears much stronger rhetoric from leading
policymakers opposing dollar weakness, low U.S. interest rates
coupled with rising asset and commodity prices will probably
weigh on the dollar, analysts say.
"It's ongoing risk appetite, stronger equities, positive
global recovery and the Fed showing no sign of raising rates.
It's not easy for the dollar to get any traction," said Peter
Frank, senior strategist at Societe Generale in London.
"It's one thing to say you want the dollar to stop
weakening, it's another to put your money where your mouth is.
The market isn't there yet, and won't take notice until it hears
this kind of commentary more and from higher ranking officials,"
Frank said.
The dollar has been under sustained pressure this year due
to expectations of low U.S. interest rates and questions about
its status as the world's leading reserve currency.
At 1119 GMT the dollar index <.DXY>, a measure of its
strength against six major currencies, was down 0.3 percent at
75.277 after dipping as low as 75.103, its lowest in 14 months.
After failing to take out options barriers at $1.50, the
euro was last at $1.4965 <EUR=>, flat on the day. It earlier
touched a 14-month high of $1.4994 <EUR=>.
The yuan jumped against the dollar in benchmark offshore
non-deliverable forwards (NDFs) after Market News International
quoted an unnamed Chinese government source's concern over the
dollar.
The dollar fell as low as 90.08 yen, aided by the narrowing
of the U.S.-Japanese 10-year bond yield spread to 200 basis
points Tuesday from around 215 basis points late last week. It
later pared losses to trade flat on the day around 90.45 yen.
Comments by Japanese Finance Minister Hirohisa Fujii that
dollar weakness was due to U.S. monetary easing were used as an
excuse to sell the dollar down to 90 yen, where traders said
there were options expiries later on Tuesday [].
EUROPE GETTING TWITCHY ON EURO?
Euro zone finance officials discussed foreign exchange rates
at a two-day meeting due to end later on Tuesday. Traders had
been on the lookout for any comments on euro strength and dollar
weakness but European Central Bank President Jean-Claude Trichet
repeated on Monday his support of the U.S. view that a strong
dollar was in the U.S. interest. []
On Tuesday, Henri Guaino, a top adviser to Sarkozy, said the
euro at $1.50 is a "disaster" for European industry and economy.
A trade-weighted measure of the euro's value against 24
major trading partners <EUREER=ECBF> was fixed lower on Monday,
but remained very close to its all-time high.
U.S. Federal Reserve Chairman Ben Bernanke called on Monday
for action on global imbalances in comments which some analysts
saw as a veiled endorsement of a lower dollar.
"Bernanke's comments are being taken by the market that
rates are on hold for longer. That's risk-positive and
dollar-negative," said Geoff Kendrick, strategist at UBS in
London, adding it was only a matter of time until the euro hit
$1.50 .
The Australian dollar climbed as far as $0.9310 after
minutes from the Oct. 6 Reserve Bank of Australia policy meeting
said it may be imprudent to keep rates very low. []
