* MSCI world equity index up 1 pct at 283.51
* Dollar trims losses on dollar-switch report denial
* Oil firmer; government bonds weaker
By Natsuko Waki
LONDON, Oct 6 (Reuters) - The dollar fell broadly on Tuesday
while stocks rose after Australia's interest rate rise, the
first in a G20 economy in more than a year, boosted confidence
the global economic recovery is on track and others may follow.
The dollar trimmed losses after Saudi Arabia, Russia, Japan
and other policymakers denied a report that Gulf Arab states
were in secret talks with Russia, China, Japan and France to
replace the U.S. dollar with a basket of currencies in the
trading of oil. []
The Australian dollar hit a 14-month high against the U.S.
currency after the country's central bank raised interest rates
by a quarter point to 3.25 percent and heralded more to come.
[]
Combined with an upbeat U.S. services sector report on
Monday, investors are expecting that gradual, not sudden,
unwinding of emergency monetary policy would give a vote of
confidence that the global economic recovery is on track.
"The big story is Australia as other countries will now seek
to raise rates, in contrast to the United States where the Fed
is expected to raise rates last," said Lee Hardman, currency
analyst at Bank of Tokyo-Mitsubishi UFJ.
In the short term, the dollar would remain under pressure as
risk sentiment was still improving and capital flows were
turning towards higher growth and emerging assets, he said.
The dollar fell 0.3 percent against a basket of major
currencies <.DXY>, and it was down half a percent at 89.10 yen
<JPY=>. The Australian dollar rose as high as $0.8882 <AUD=>.
The MSCI world equity index <.MIWD00000PUS> rose 1 percent
while the FTSEurofirst 300 index <> gained 1.4 percent.
Emerging stocks <.MSCIEF> added 1.6 percent.
U.S. stock futures gained 0.9 percent <SPc1>, pointing to a
firmer open on Wall Street later.
A move by Societe Generale <SOGN.PA> to repay 3.4 billion
euros of state support and pursue acquisitions, a week after a
similar decision by rival BNP Paribas <BNPP.PA>, was also
positive.
Societe Generale launched a 4.8 billion euro rights issue,
joining a recent rush of European banks to raise new share
capital to help rebuild their balance sheets and pay off costly
state aid received during the credit crisis.
MORE HIKES
Australia's move is expected to be followed by Korea, whose
won currency also hit a one-year high against the U.S. currency
before retreating on suspected intervention by the authorities.
The Reserve Bank of Australia, after delivering a hike, said
it was safe to row back on stimulus now that the worst danger
for the economy had passed. Investors are now pricing in at
least one more rate rise by Christimas and rates above 4 percent
in a year.
"The real news is the upbeat outlook that accompanied the
move, with a bullish growth forecast suggesting further hikes
are more than likely. Now that the cycle of global loosening is
broken, Norway will almost certainly be next at the end of the
month and attention will turn to Canada and New Zealand," Royal
Bank of Canada said in a note to clients.
"With other cyclical countries hiking, the Bank of Canada
and the Reserve Bank of New Zealand commitments to keep rates
unchanged till mid/late 2010 respectively, may begin to look
untenable. We see scope for the NZ dollar and Canadian dollar
rallies as those hikes start to be priced in."
The U.S. dollar fell earlier in Asia after Britain's
Independent newspaper cited unidentified sources in Gulf Arab
states and Chinese banking sources in Hong Kong in a report on a
possible move to replace the dollar in oil trading.
U.S. crude oil <CLc1> rose 1.4 percent to $71.43 a barrel,
helped by a weaker dollar, which pushed gold to an 18-month peak
of $1,026.35 an ounce <XAU=>.
The December bund future <FGBLc1> fell 26 ticks.
(Additional reporting by Tamawa Desai; Editing by Ron Askew)
