* Dollar rises, pulls away from 14-month low vs euro
* Weaker stocks show lower risk tolerance
* Euro remains near $1.50, renewed rally expected
* China stimulus fears briefly rattle market
* Report suggests Canada can cope with stronger currency
(Recasts, updates prices, adds details, changes byline)
By Nick Olivari
NEW YORK, Oct 22 (Reuters) - The dollar rose on Thursday
and the euro retreated from a 14-month high as most investors
bet the greenback's recent sharp slide against major currencies
had been too far, too fast.
The dollar hit a one-month peak at 91.70 yen <JPY=> while
commodity-linked currencies such as the Australian dollar
retreated from a near 15-month high and stocks and oil fell.
Since April, the dollar has lost nearly 12 percent against
six major currencies <.DXY>, with heavy selling in recent weeks
pushing it to the lowest in more than a year.
Investors began to question how much further the dollar
could slide, and how much other assets could rally, sending
funds out of riskier currencies that have gained on signs of
economic recovery.
"We've seen a big move across a host of assets lately and a
lot of people are looking for when we're going to top out, so
there's some profit-taking today," said Camilla Sutton, senior
currency strategist at Scotia Capital in Toronto.
Worse-than-expected U.S. jobless claims data on Thursday
offset generally positive U.S. earnings and rekindled doubts
about the strength of the United States' economic rebound.
With U.S. unemployment near 10 percent, investors expect
interest rates to remain at record lows well into 2010 even if
signs of stronger world growth prompt other central banks to
raise rates and begin winding down some emergency spending.
Low rates make the dollar less attractive than higher-yield
currencies more closely correlated with economic recovery. At
the same time, economic jitters boost the dollar's safety
appeal.
The euro fell 0.1 percent at $1.5000 <EUR=> after hitting a
14-month peak of $1.5046 Wednesday. The dollar was last up 0.4
percent to 91.37 yen <JPY=> and sterling was little changed at
$1.6599 <GBP=> though off Wednesday's one-month high.
Sterling stalled a multi-day rally after data showing UK
retail sales were flat in September helped slow the pound's
upward momentum. For more see [].
Against the Canadian dollar, the greenback rose 0.7 percent
to C$1.0501 <CAD=>. Earlier it rose to C$1.0544 but eased back
after the Bank of Canada's quarterly monetary policy report
suggested officials think the economy can cope with a stronger
currency. []
The Bank of Canada left interest rates at record lows this
week and dashed expectations of a hike before mid-2010.
The Australian dollar <AUD=> fell 0.5 percent to $0.9226.
Sutton, though, said the dollar is still vulnerable, while
Michael Klawitter, senior strategist at Commerzbank in
Frankfurt, added "the euro's proximity to $1.50 suggests that
the market is not taking the correction too seriously."
Another trigger for the dollar's gains, analysts said, were
fears that China may start considering withdrawing some of its
emergency stimulus programs after data showed the economy grew
by a robust 8.9 percent in the third quarter.
But the government said it would retain its ultra-loose
monetary and fiscal policies, and Chinese-based analysts added
growth was not strong enough to trigger policy tightening.
[]
"There are fears that when there is a removal of stimulus
the underlying fundamentals won't be enough to drive global
growth," Scotia's Sutton said. "But the truth is there is a lot
of growth coming out of China and that whole region."
Economists polled by Reuters expect the U.S. economy to
have expanded 3.2 percent in the third quarter, ending a
recession that began in December 2007.
(Additional reporting by Steven C Johnson in New York and
Jessica Mortimer in London; Editing by James Dalgleish)
