Dollar Rebounds Modestly as Investors Take Profits

The dollar rose broadly Thursday as most investors bet the greenback's recent sharp slide against major currencies had gone too far, too fast.

Since April, the dollar has lost around 12 percent against six major currencies, with heavy selling in recent weeks pushing it to the lowest in more than a year. But Thursday, the dollar index gained to around 75.

The dollar hit a one-month peak at 91.70 yen while commodity-linked currencies such as the Australian dollar retreated from a near 15-month high.

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 dollar was up at near 91 yen .

Against the Canadian dollar , the greenback rose to about C$1.04. 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 was last little changed at about $0.92, after going as low as $0.9186.

The dollar did lose some of its gains as the New York session began to wind down. Analysts said there was no specific news but investors were beginning to rebalance positions after the day's trading.

"There is nothing going on," said Win Thin, senior currency strategist at Brown Brothers Harriman. "There is a little position squaring at end of day."

The euro rose on the session and was last up at about $1.50 after hitting a 14-month peak of $1.5046 Wednesday. It had traded as low as $1.4944 on Thursday. Sterling was last up at about $1.66, near a one-month high and shrugging off early sluggishness after data showing UK retail sales were flat in September.

Dollar Vulnerable

Scotia's Sutton said the dollar is still vulnerable and 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.

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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. The advanced reading of U.S. third-quarter gross domestic product is slated for release next week.

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