FOREX-Dollar falls, Geithner beats drum for econ rebalancing

* Geithner calls for G20 not to block currency appreciation

* Also calls for 4 pct cap on BOP imbalances

* Doubts remain on coordinated G20 action on FX

By Hideyuki Sano

TOKYO, Oct 22 (BestGrowthStock) – The dollar fell on Friday after
U.S. Treasury Secretary Tim Geithner urged the Group of 20
nations not to weaken their currencies or keep them undervalued,
in his push for a coordinated move to fix global imbalances.

“Geithner appeared to be more aggressive (about global
economic rebalancing), leading to the dollar’s weakness,” said a
trader at a Japanese bank.

Some in the market saw his comments as suggesting a limited
effort to move to immediately prop up the dollar.

Geithner also said emerging economies with undervalued
currencies and solid reserves must allow their currencies to
adjust in line with fundamentals, while a G20 source told Reuters
he also called for a 4 percent cap on current account imbalances.

The euro (EUR=: ) gained about 0.3 percent while the Australian
dollar (AUD=D4: ) rose 0.5 percent after Geithner made his proposal
in a letter to G20 finance chiefs ahead of a meeting in South
Korea later the day.

The U.S. proposals, including a plan to set a numerical
balance of payment target, have so far run into stiff resistance
from many other G20 partners. [ID:nN21252058]

A senior G20 official, however, put the chances for an
agreement on current account targeting at even. [ID:nASF000020]

“It looks like the markets’ interpretation of it and why it’s
driven the dollar lower is that Geithner’s preoccupation with
trade issues as opposed to currency suggests there won’t be any
coordinated effort to underpin the U.S. dollar,” said Sue Trinh,
senior FX strategist at Royal Bank of Canada,

“It looks like there’s still quite a divide in terms of
beliefs and expectations. Any thought of a consensus looks pretty
difficult at this stage … but it’s a long time between now and
Saturday (when the G20 will issue a communique),” Trinh said.

Some saw the possibility of a statement playing down the
notion of a currency conflict, which might offer the dollar some
support in the near term, but others said any reaction would be
brief and attention would flick back to the other major question
of how big any quantitative easing by the Federal Reserve might
be.

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For FX PDF “Race to the bottom” http://r.reuters.com/gez77p

FX graphics http://r.reuters.com/deh58p

G20 graphic: http://link.reuters.com/men39p

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CURRENCY CONSENSUS

The dollar index (Read more about the global trade. ) (=USD: )(.DXY: ) fell 0.2 percent to 77.264,
slipping further away from resistance at 77.60-65, a break of
which is vital to keep up momentum for a higher bounce from a
10-month low of 76.144 hit last week.

It has major trend-line support at 76.10, which could limit
its downside, although a break there could open the way to last
November’s low at 74.17.

Prospects for the Fed to pump more money into the economy
next month, likely through direct purchases of Treasury debt,
have pushed the dollar down more than 7 percent against other
major currencies since September.

The euro, which corrected sharply lower this week after a
month-long rally, needs to tackle resistance at $1.4050, which it
failed to clear on Thursday.

A break above that would open up the way for a retest of
$1.4161, the top of the recent rally and its highest level since
January.

Dollar/yen slipped 0.3 percent to 81.10 yen (JPY=: ), still
holding above its latest 15-year low of 80.84 yen set this week
and keeping away from its record postwar low of 79.75 set in
1995.

Wariness about intervention has kept the dollar supported,
after Japan intervened in September for the first time in six
years.

“People are just not quite sure what Japan’s tactics are on
the currency and how afraid they should be. But clearly there is
a little bit of unease about putting on a fresh short position
from here,” said Sean Callow, a currency strategist at Westpac
Bank in Sydney.

But some traders also said speculation is mounting that Japan
may not intervene in the near future as global debate is raging
over competitive currency devaluation.
(Additional reporting by Ian Chua in Sydney and Charlotte Cooper
in Tokyo; Contribution by Reuters FX analyst Krishna Kumar;
Editing by Edmund Klamann)

FOREX-Dollar falls, Geithner beats drum for econ rebalancing