* Euro falls roughly 1 pct vs dollar, yen
* Market watching stocks, U.S. earnings for direction
* SNB to stick "decidedly" to preventing franc rise - Roth
* ECB starts covered bond purchases slowly
(Adds quotes, updates prices)
By Naomi Tajitsu
LONDON, July 10 (Reuters) - The dollar rose broadly and the
yen hovered near the week's peaks against other major currencies
on Friday on investor caution as the U.S. corporate earnings
season began and share prices fell.
The yen hit a five-month high against the dollar this week
and surged to two-month highs against the euro and Australian
dollar as investors unwound bets in riskier assets that they
made using the low-yielding Japanese currency.
It lost a chunk of those gains on Thursday but then held its
ground as the other currencies lost momentum and S&P stock
futures <SPc1> signalled a weak start to Wall Street later.
"It's back to the risk aversion story, in which the dollar
and yen gain," said Christian Lawrence, currency strategist at
RBC Capital Markets.
The yen gained in particular this week as the dollar's
reserve currency status came under scrutiny, although reaction
was muted to calls from China for a review of the reserve
currency system at a meeting of world leaders on Thursday.
By 1059 GMT, the euro was 0.9 percent lower at $1.3897
<EUR=>. The common currency <EURJPY=R> was down 1.1 percent
against the yen at 128.90 yen.
European shares were down 0.8 percent <>.
The dollar index, which tracks performance against a basket
of six major currencies, was up 0.7 percent at 80.429 <.DXY>.
The dollar was down 0.2 percent at 92.74 yen <JPY=>.
SWISSIE EYED
Analysts said that data earlier this week showed that
speculators are holding the most short positions in the dollar
since before the collapse of Lehman Brothers in autumn, which
had sparked massive risk aversion and dollar demand.
Peter Frank, currency strategist at Societe Generale in
London, said this accumulation of shorts may be a warning sign
that a shift back into long positions may be imminent, as
optimism fades about improvements in the global economy.
"Speculators are still positioned for risk appetite, but the
market is going the other way," he said.
He added that traders may be looking for opportunities to
flip those positions, and that further losses in equities, oil
and commodities may trigger a hefty rise in the dollar.
The European Central Bank and euro zone national central
banks bought 23 million euros' worth of covered bonds under the
60 billion euro programme launched this week, the ECB said on
Friday. [] The programme is aimed at boosting
lending to stimulate the ailing economy.
The Swiss franc edged lower after Swiss central bank chief
Jean-Pierre Roth said in an interview published on Friday the
Swiss National Bank was sticking "decidedly" to its policy to
prevent an appreciation of the Swiss franc. []
The dollar gained 1.0 percent on the day to 1.0908 Swiss
francs <CHF=> while the euro rose 0.3 percent to 1.5165 francs.
Sterling fell 0.8 percent on the day to $1.6205 <GBP=>,
relinquishing gains made on Thursday in part after the Bank of
England surprised markets by not using the remaining 25 billion
pounds available under the current asset-buying programme.
The central bank has said it will review the programme in
August when it releases new quarterly forecasts.
(Additional reporting by Tamawa Desai; Editing by Ron Askew)
