FOREX-Dollar trims gains made on Geithner comments

* Dollar trims gains made on Geithner comments in WSJ

* Analysts: Comments do not signal change in U.S. FX policy

* Traders cite Asian demand boosting euro vs dollar

(Adds comment, updates throughout; previous TOKYO)

By Naomi Tajitsu

LONDON, Oct 21 (BestGrowthStock) – The dollar trimmed gains against
the euro on Thursday as investors reckoned comments from U.S.
Treasury Secretary Timothy Geithner may not have warranted a
brief jump in the U.S. currency earlier in the day.

The dollar approached a 15-year low against the yen in early
European trade while the euro neared the day’s high. The U.S.
currency remains on the back foot on speculation the Federal
Reserve may implement more quantitative easing next month, which
would be negative for the dollar.

The Wall Street Journal quoted Geithner as saying major
currencies were roughly in alignment and that he would use a
weekend meeting of G20 finance ministers to advance efforts to
rebalance the world economy and move toward norms on currency

He divided currencies into three categories. The first,
including China’s yuan, were undervalued by any measure, while
the second group were those of emerging economies with flexible
exchange rates that intervene or impose taxes. [ID:nN21252058]

The third comprised major currencies “which are roughly in
alignment now”, a comment the WSJ said suggested he saw no
reason for the dollar to fall further against the euro and yen.

Investors initially took that as a cue to buy the dollar,
but analysts argued Geithner’s comments did not mark a
significant change in U.S. forex policy, adding that this
explained the pullback in the U.S. currency’s gains.
“What Geithner said was not targeted at the U.S. dollar. He
was making his position clear before the G20 that the U.S. would
not fight everybody on FX, just China,” said Ulrich Leuchtmann,
currency strategist at Commerzbank in Frankfurt.

By 0746 GMT, the euro (EUR=: ) was flat on the day at $1.3970,
recovering from a slide to $1.3874 in earlier trade, according
to Reuters data. Traders said Asian demand was helping to boost
the single European currency in early European trade.

The dollar index (Read more about the global trade. ) (.DXY: ) was little changed at 77.197. It hit
a 10-month low of 76.144 last week.

The dollar (JPY=: ) fell as low as 80.93 yen according to
Reuters data, pulling back from the day’s high of 81.82 yen and
closing in on 80.84 yen hit on Wednesday, its weakest since

The market is wary that Japanese authorities could intervene
to slow the yen’s rise again, after they did so on Sept. 15,
selling yen for the first time in more than six years.


Analysts said speculators cut hefty short positions in the
dollar on the article while longer-term investors were hesitant
to take big positions in either direction ahead of the G20 meet
and the Federal Reserve’s policy meeting next month.

Speculation of a grand bargain by the G20 to rebalance the
global economy is swirling, with G20 finance and central bank
chiefs meeting on Friday in South Korea to discuss a a common
path on managing currency, trade and economic imbalances. G20
leaders will meet in Seoul next month.[ID:nTOE69K01G]

Taisuke Tanaka, FX strategist at Nomura Securities in Tokyo,
said Geithner’s comments, along with his other recent remarks
stressing the U.S. was not pursuing a deliberate policy of
devaluing the dollar, were probably intended to help
Washington’s negotiating position at the G20.

“If they urge China to revalue the yuan, they might be told
that the dollar’s weakness is the problem,” Tanaka said.

“Since it is clear that the direction is toward an expansion
of quantitative easing (in the United States), it is hard to
expect a sustained rebound in the dollar,” he said.
(Additional reporting by Tokyo Forex Team; Editing by Catherine

FOREX-Dollar trims gains made on Geithner comments