* Aussie's next target seen at $0.8960
* Kiwi boosted by higher dairy prices
* Yen seen helped partly by Nomura share sale
By Kaori Kaneko
TOKYO, Oct 7 (Reuters) - The dollar was on the defensive on
Wednesday while higher-yielding currencies such as the Australian
dollar held near their 2009 highs, buoyed by investors' search
for bigger returns.
Japanese shares rose <> following gains on Wall Street
and gold prices <XAU=> held close to a record high set the
previous day. Base metals also made solid gains, all of which
supported growth-linked currencies.
"With the view that the low interest rate policy in the U.S.
will likely be around for a while, an abundant supply of dollars
is flowing into higher-yielding currencies such as the Australian
dollar and emerging market currencies," said Kazuyuki Kato,
treasury department manager at Mizuho Trust & Banking.
"Also some with excess dollars are looking for other
attractive assets such as gold."
Expectations that U.S. interest rates will stay low as the
economy tries to pull out of recession mean the dollar could be
the funding currency of choice for carry trades.
Near-zero rates have increased the dollar's appeal in carry
trades, where investors borrow in a cheaper currency to buy
higher-yielding assets.
The dollar index <=USD>, edged up 0.1 percent to 76.384,
having lost ground steadily after touching a three-week high of
77.475 last week.
It hit a 13-month low of 75.827 last month and could retest
that level, although some market players said a further fall
towards its March 2008 lows at the 70 level would require a surge
in the euro versus the dollar, and that may not be likely in the
near term, dealers said.
The greenback came under pressure on Tuesday after a report
of forex diversification by oil-producing countries.
[].
Although some of these countries later denied such a move,
traders said the dollar's broad slide is likely to persist as the
world commits to resolving global economic imbalances.
Resolving imbalances implies a new global growth framework in
which countries with large current account surpluses, like China,
focus on boosting domestic demand, while deficit nations like the
U.S. undertake policies to increase savings.
"The economic framework is changing with the dollar's status
as a world reserve currency being slowly but surely challenged by
talk about SDR (special drawing rights) or the Chinese renminbi,"
said a senior trader for a Japanese bank.
The SDR is an international reserve asset created by the
International Monetary Fund. It is allocated to IMF member
countries with its exchange rate determined by a basket of
currencies.
The euro slipped 0.1 percent to $1.4710 <EUR=>, but stayed in
sight of near two-week highs touched on Tuesday.
YEN ON NOMURA
Traders said the yen's rise this week was partly due to a
share sale by Japanese brokerage Nomura, which is expected to
raise about 433 billion yen ($4.9 billion), part of which is
likely to be bought by overseas investors.
Traders said foreign demand for Nomura's new shares may
provide support to the yen towards the payment date on Oct. 13.
Other Japanese banks may join Nomura in raising fresh capital
in the coming months to meet new capital adequacy
requirements.[]
The dollar fell 0.1 percent against the yen to 88.73 yen
<JPY=>, towards its eight-month low of 88.23 yen struck last
week.
The euro <EURJPY=R> fell 0.2 percent to 130.46 yen.
The Australian dollar <AUD=D4> hovered near 14-month highs
against the dollar in the wake of the Reserve Bank of Australia's
decision to hike the cash rate by 25 basis points to 3.25 percent
on Tuesday. []
"The RBA is spearheading the global exit strategy and it is
no coincidence that the stronger cyclical commodity countries
Norway, Canada, and even New Zealand are likely to lead the way
well ahead of their more structurally impaired counterparts --
U.S. and the UK," said Su-Lin Ong, senior economist at RBC
Capital.
The Aussie edged down 0.1 percent to $0.8902 <AUD=D4> but
remained in reach of $0.8920 hit on Tuesday, its highest since
August 2008. Traders said the currency's next target would be at
$0.8960 and then at $0.9000.
The New Zealand dollar held at $0.7342 <NZD=D4> with a surge
in dairy prices helping at the margins. []
The kiwi is not far from a 14-month high of $0.7379 hit on
Tuesday.
(Additional reporting by Anirban Nag in Sydney and Satomi
Noguchi in Tokyo; Editing by Chris Gallagher)
