FOREX-Dollar falls as risk aversion eases on Citi news

* Dollar falls as risk aversion cools

* U.S. stock futures rise after Citigroup plan

* Real economy picture remains weak

* German Ifo underlines struggling euro zone economy (Recasts, adds comments, changes byline, dateline, previous

LONDON)

By Vivianne Rodrigues

NEW YORK, Nov 24 (Reuters) - The U.S. dollar fell against the euro and a basket of currencies on Monday as risk aversion eased after the U.S. government agreed to inject $20 billion of new capital to rescue troubled Citigroup (C.N: Quote, Profile, Research, Stock Buzz).

European stocks rose, while U.S. stock futures were all pointing to a positive Wall Street open in a sign of higher risk appetite, which has been linked recently to dollar weakness.

While investors still remain cautious due to ongoing concerns about a global recession, they welcomed the U.S. government's $300 billion-plus lifeline to prevent the collapse of the world's largest banking group [ID:nSP406175].

"The forex market continues to be all about risk appetite and its proxy, equities," said Dustin Reid, director of FX strategy at RBS Global Banking & Markets in Chicago.

The rescue plan "clearly sends a signal that some of the U.S. banks, in the government's view, are too big and important to fail. The move should also help to calm overall market sentiment for the very short-term."

In morning trading in New York, the euro was up 1.4 percent on the day versus the dollar at $1.2758 , while it also rose 1.2 percent to 122.12 yen .

The U.S. currency slipped 0.2 percent to 95.70 yen , while sterling followed the rallying direction of UK share prices and rose 0.7 percent to $1.5005 .

The dollar was also 0.8 percent lower at 86.717 against a basket of currencies .DXY.

"Looking back on it, I think the market is concluding that maybe it was the wrong thing to let Lehman fail," said Chris Turner, head of FX strategy at ING in London.

"So maybe this (Citi package) is the new model for how you handle the systemically-important banks in the States," he added.

Demand for U.S. stocks rose, while the dollar has been falling since late Friday after news leaked that New York President Timothy Geithner will be named by U.S. President-Elect Barack Obama as Treasury secretary.

Obama is expected to officially appoint Geithner at a press conference in Chicago at 12 p.m. Eastern time (1700 GMT) and may also discuss an economic stimulus package.

REAL ECONOMY CLOUDS

The euro earlier eased after a below-consensus reading for the German business climate underlined weakness in the German economy, keeping expectations high for cuts in euro zone interest rates [ID: nBEB002256].

The Munich-based Ifo economic research institute said its business climate index declined to 85.8 in November from 90.2 in October, hitting its lowest since February 1993. The reading was weaker than forecasts of a 88.7 reading.

"(The reading) was truly awful and suggests that the fall in output in the euro zone's largest economy gained both momentum and traction in the fourth quarter," said Tom Vosa, head of market economics at nabCapital in London.

"The sharp slowdown seen in Germany and elsewhere will put pressure on the ECB to cut rates aggressively," he said, adding that the ECB may cut rates by 75 or even 100 basis points from 3.25 percent next month.

In Britain, Prime Minister Gordon Brown and his finance minister, Alistair Darling, are expected to announce a package totaling up to 20 billion pounds ($30 billion), by cutting sales tax and offering help for businesses, low earners and struggling home owners. [ID:nL0672267] (Additional reporting by Veronica Brown in London; Editing by Chizu Nomiyama)

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FOREX-Yen, dollar stung as stocks regain footing

(Updates prices, adds quote and comment, changes byline)

* Citi merger talk, equity rebound prompt FX turnaround

* Sterling, Aussie and NZ dlrs rise as risk aversion cools

* Weak EZ PMI a reminder of economic, financial distress

By Naomi Tajitsu

LONDON, Nov 21 (Reuters) - The dollar and the yen fell sharply against higher-yielding currencies on Friday as a rebound in global stocks from the previous day's rout prompted some investors to creep back into riskier assets.

European shares managed to stay in positive territory, taking a lead from gains in Asian stocks, while talk that beleaguered U.S. bank Citigroup (C.N: Quote, Profile, Research, Stock Buzz) could explore a merger deal helped to quell Thursday's extreme risk aversion.

Analysts said Friday's move was a correction of yen- and dollar-buying earlier in the week, when investors dumped risky assets, including those in euros, sterling and the Australian and New Zealand dollars, on concerns about a global recession and the ongoing financial crisis.

"It's a 'three steps back, one step forward' move today," said Geoffrey Yu, currency strategist at UBS in London, adding that traders were adjusting positions in higher yielders following three days of heavy selling.

"The market is trying to be optimistic, but not get carried away."

Despite a slight lift in risk aversion, market participants pointed out that surprisingly weak purchasing managers indices from the euro zone on Friday offered a reminder that the euro zone's recession may be more severe than thought.

The euro traded 1.0 percent higher at $1.2589 by 1218 GMT, after climbing as high as $1.2624 in early trade. The euro was boosted by a 0.6 percent rise in European shares .FTEU3, while U.S. stock futures pointed to a higher market open.

Stocks rebounded, as investors were cautiously optimistic that Citigroup, which has lost half of its market value this week, is weighing various options including selling part of the company or merging with another firm [ID:nN20470744]

Worries about the future of Citigroup on Thursday helped to push the S&P 500 index to its lowest point since 1997.

YEN STRUGGLES

The euro climbed nearly 2 percent against the yen to 119.40 yen, bouncing back from a three-week low around 116.45 yen hit according to Reuters data in Asia very early in the day.

The dollar was up 0.8 percent on the day at 94.82 yen , recovering from a three-week low of 93.55 yen struck early in Asia.

The yen was on the back foot after investors took comments from Japanese Finance Minister Shoichi Nakagawa that authorities must be ready to deal with big market swings [ID:nTKG003105] as a reminder that Japan will step in to stem the yen's rise if needed.

There was little reaction to the Bank of Japan's widely expected move to hold rates at 0.30 percent. [ID:nT14410]

The Australian and New Zealand dollars were both up roughly 2 percent against the greenback and 3 percent versus the yen, while sterling jumped as much as around 2 percent to a session high of $1.5060 .

The Swiss franc remained under pressure a day after the Swiss National Bank stunned markets with a surprise interest rate cut of 100 basis points. The dollar rose as high as 1.2298 francs, its strongest level since June 2007.

The economic fragility that prompted the SNB's aggressive move was also highlighted on Friday by a report that showed euro zone manufacturing and service sectors contracting much more quickly and deeply than expected in November.

The flash purchasing managers' indices tumbled to record lows and also showed that inflationary pressures in the 15-nation currency bloc were fading fast. [ID:nLAG003116].

The weaker-than-expected PMI survey "likely will feed the recession fears gripping markets and pose more downside for risk assets," JP Morgan currency strategists said in a note. (Editing by Stephen Nisbet)

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FOREX-Dollar, yen slip as stocks, risk appetite recover

(Updates prices, adds quote and comment, changes byline)

* Citi merger talk, equity rebound prompt FX turnaround

* Sterling also rises as risk aversion cools

* Weak euro zone PMI a reminder of economic distress

* For up-to-the-minute market news, click on FXNEWS (Updates prices, adds comments, changes byline, dateline)

By Steven C. Johnson

NEW YORK, Nov 21 (Reuters) - The dollar and yen fell on Friday as global stocks rebounded and reports that banking giant Citigroup was mulling a merger with another firm helped quell market anxiety.

The more relaxed mood prompted those who had lately sold risky assets in favor of the U.S. and Japanese currencies to reverse course and move back gingerly into stocks, commodities and higher-yielding currencies such as the euro and sterling.

"It feels like we've reached a point where total fear is receding a little. There's an inkling of hope that we may be near a bottom, which is reflected in equities and high-yielding currencies today," said Boris Schlossberg, senior currency strategist at GFT Forex in New York.

Geoffrey Yu, currency strategist at UBS in London, said "the market is trying to be optimistic but not get carried away."

Early in New York, the euro was up 0.9 percent at $1.2575 though it was off a $1.2640 session high. It rose 1.8 percent to 119.22 yen . Sterling added 1.6 percent to $1.4964 . The dollar rose 1 percent to 94.90 yen .

Asian and European shares also rose and Wall Street opened on a firm footing, lifted partly by news that Citigroup (C.N: Quote, Profile, Research, Stock Buzz), which lost half its market value this week, was considering selling parts of its business or merging with another company.

Citigroup's board of directors is scheduled to meet on Friday to discuss options, the Wall Street Journal reported, citing people familiar with the situation. For details, see [ID:nN20470744]

Worries about the future of Citigroup on Thursday had pushed the bank's shares to their lowest in more than a decade, helping drive the S&P 500 index to its weakest point since 1997.

But while the reports about Citi on Friday eased some concern about another major bank failure, some said it would not be enough to improve lending conditions and pull markets out of their malaise.

Analysts at Brown Brothers Harriman said both the euro and sterling are overbought and are ripe for a reversal before the day is through, as neither has been able to move above key resistance levels of $1.2660 and $1.51, respectively.

Schlossberg said the test will be whether investors feel confident enough to remain long U.S. equities and higher risk currencies such as the euro and sterling through the weekend.

"If you see people buying equities into the close today, that will be euro and sterling positive, but if stocks sell off in late trade, currencies will react and the dollar and yen should benefit," he said.

Earlier, euro zone data showed the manufacturing and service sectors contracting much more quickly and deeply than expected in November, rekindling worries about global growth.

The weaker-than-expected PMI survey "likely will feed the recession fears gripping markets and pose more downside for risk assets," JP Morgan currency strategists said in a note.

The yen was mostly a victim of renewed risk appetite on Friday, though it also buckled when Finance Minster Shoichi Nakagawa said authorities must be ready to deal with market price swings [ID:nTKG003105]. Analysts said investors saw that as a warning that Japan could still step in to slow yen gains.

(Additional reporting by Naomi Tajitsu in London; Editing by Chizu Nomiyama)

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FOREX-Euro surges to sesion peak vs dollar, up 1 pct on day

NEW YORK, Nov 19 (Reuters) - The euro rose to a session high against the dollar on Wednesday in a move analysts said was related to a large buy order for the single currency.

The euro rose suddenly to a session high of $1.2767 from around $1.2640. It last traded at $1.2751, up 1 percent from late Tuesday.

Michael Woolfolk, senior currency strategist at The Bank of New York-Mellon, said the move was tied largely to flows, not fundamentals, and said it began after two U.S. economic reports had been digested by the market.

"Conditions are very illiquid, and in such market conditions, even a liquid pair such as euro-dollar can be affected by a large order," he said. (Reporting by Steven C. Johnson; Editing by Theodore d'Afflisio)

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FOREX-Yen advances vs dollar, euro, stocks eyed for direction

* Euro rises vs dollar as stocks relatively steady

* U.S. data shows record consumer price slide in Oct

* Sterling rises, shakes off BoE minutes

* Anxiety abounds about future of US automakers

* For up-to-the-minute market news, click on FXNEWS (Updates prices, adds comment, U.S. data, changes byline, dateline)

By Steven C. Johnson

NEW YORK, Nov 19 (Reuters) - The dollar fell against the euro and sterling on Wednesday as U.S. stocks stabilized and big buy orders for the European currencies pushed them through key technical levels.

A U.S. economic report showing a record slide in consumer prices last month also added to pressure on the dollar as it suggested the Federal Reserve may have to cut benchmark interest rates from an already low 1 percent.

Analysts, however, said investors remained skittish about the health of the world economy and were likely to take future cues from Wall Street's next move higher or lower.

"We saw euro and the sterling break through key trend lines and momentum traders jumped in and followed the moves to push them higher," said Brian Dolan, head of research at Forex.com in Bedminster, New Jersey.

"But I think this is a false break because we're likely to see stocks relapse into negative territory, as there's no reason for them to rally in this environment."

Mid-morning, the euro was up 1.3 percent at $1.2780 after earlier hitting a session peak of $1.2801. It rose 0.9 percent to 123.79 yen .

Sterling added 1.5 percent to $1.5200 after breaking above the the $1.51 area, which Dolan said was a key trend line in a steady decline that began when it traded around $1.66.

Traders shrugged off minutes from this month's Bank of England policy meeting that showed policymakers unanimously agreed to cut interest rates by 150 basis points and even discussed a bigger cut. For details, see [ID:nLJ451755].

Analysts said investors were still wary of taking on too much risk, as evidenced by the dollar's 0.2 percent slide to 96.80 yen .

The yen rises along with risk aversion because investors unwind trades in higher-yielding assets and currencies that had been financed with cheaply borrowed yen.

Also of particular concern was the fate of the struggling U.S. auto industry, which some investors fear may fail to win emergency government loans.

Michael Woolfolk, senior currency strategist at The Bank of New York-Mellon, said bankruptcy for General Motors, Ford or Chrysler "could prove to be the next Lehman Brothers because of the systematic risk their failure would create."

Markets tumbled in September when U.S. investment bank Lehman Brothers failed.

"Equities moved dramatically lower in October and the dollar and yen rallied, and most people still fear moves in that direction will reassert themselves," said David Watt, currency strategist at RBC Capital Markets in Toronto.

Economic data on Wednesday showed U.S. consumer prices plunged 1 percent in October, while core prices that remove food and energy costs fell 0.1 percent.

Kathy Lien, head of currency research at GFT Forex in New York, said "less price pressure will give the Federal Reserve more room to cut interest rates," adding she expects the federal funds rate to drop to 0.5 percent from its current 1 percent next month. (Additional reporting by Vivianne Rodrigues in New York and Naomi Tajitsu in London; editing by Tom Hals)

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FOREX-US dollar steadies as risk aversion eases

* Yen slides as stocks gain, high-yielders rise

* US dollar underpinned by funds demand by month-end

* U.S. 3Q GDP declines less than expected (Updates prices, adds quotes, changes byline)

By Wanfeng Zhou

NEW YORK, Oct 30 (Reuters) - The U.S. dollar rose against the yen on Thursday, but was little changed against the euro, after gains in world stock markets and an interest rate cut by the Federal Reserve on Wednesday helped ease the recent flight into the dollar.

Adding to pressure on the yen was growing speculation that the Bank of Japan will cut interest rates by a quarter percentage point on Friday.

The U.S. dollar also edged higher against the euro in late trade, although it pared most of its gains, fueled by month-end demand from fund managers seeking to square their books or rebalance their portfolios.

"Currently, U.S. dollar moves are largely reflecting equity trading and vice versa, with the dollar and equities dominated by swings between risk aversion and risk appetite," said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.

"The yen faces additional risks as the BoJ decides whether to cut interest rates," he added.

In late trading in New York, the dollar climbed 1.2 percent against the yen to 98.60 yen , extending its recovery from a 13-year trough just below 91 yen touched on EBS late last week.

The euro was down 0.2 percent at $1.2930 in volatile trade, pulling away from intra-session highs at $1.3300, but well above a 2-1/2-year low of $1.2329 hit this week on electronic trading platform EBS.

Fund managers worldwide are expected to buy substantial amounts of dollars as the month-end approaches to neutralize hedges because of the reduction in their portfolios.

"People are looking at the month-end tomorrow and the market is expecting massive demand for dollars," said Richard Franulovich, senior currency strategist at WestPac Banking Corp. in New York.

DOLLAR DEMAND STAYS

The Intercontinental Exchange's dollar index, which measures the dollar's value against six other major currencies, was up 0.1 percent at 84.652.DXY.

Data released earlier showing a smaller-than-expected contraction in the U.S. economy in the third quarter underpinned sentiment on risky assets, including higher-yielding currencies.

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FOREX-Dollar retreats vs euro after U.S. jobs gloom

* Dollar falls vs euro after U.S. sheds 240,000 jobs

* Dollar lifted vs yen as U.S. stocks shrug off jobs data

* Obama says facing economic challenge of a lifetime

* Obama says moving quickly on Cabinet appointments (Updates prices, adds comment, changes byline)

By Steven C. Johnson

NEW YORK, Nov 7 (Reuters) - The dollar dipped against most major currencies on Friday after data showed U.S. employers cut 240,000 jobs last month, pushing the jobless rate to a 14-year high and adding more dark clouds to a gloomy economic horizon.

U.S. President-elect Barack Obama, in his first press conference since winning the election, said the United States was facing "the greatest economic challenge of our lifetime" and called for a stimulus package "sooner rather than later."

Wall Street gained, however, after two straight days of steep losses, helping lift the dollar against the yen and limit its losses elsewhere. Analysts said that was partly because the jobs data underscored what investors already know: the U.S. labor market is under severe strain.

"The jobs number was bad, as expected, so we've seen some dollar selling against the euro, but markets had already priced in disaster," said Ken Landon, global currency strategist, at JPMorgan Chase in New York. "So we're seeing a bit of risk aversion coming off, with stocks higher."

The outlook for the U.S. and global economies, though, remains a dreary one, and both the dollar and euro were set to end the week down against the yen, a sign of risk aversion.

Central banks in Britain, the euro zone and Switzerland all slashed interest rates this week, and analysts said Friday's U.S. data showing 1.2 million jobs lost so far in 2008 suggests the Federal Reserve may again cut its 1 percent benchmark rate For more, see [nN07477175].

Late afternoon, the euro was up 0.5 percent against the dollar at $1.2760, but was little changed on the week. The euro rose 1 percent against the yen to 125.35 .

Sterling rose 0.4 percent to $1.5673 , while the dollar added 0.5 percent to 98.230 yen .

For the week, the dollar was 0.4 percent weaker against the Japanese currency, a sign that risk-averse investors continue buying back yen that they had used to finance purchases of higher-yield, higher-risk assets.

OBAMA PREVIEW

Friday's U.S. data fanned fear of a much deeper slowdown in both the U.S. and global economies. Following the report, the interest rate futures market had fully priced a quarter-point cut in the Fed's benchmark interest rate in December and put the odds of a half-point cut at better than around 64 percent.

Still, analysts are convinced the dollar will continue to rally despite the data and increased odds of a rate cut.

That's because a worsening global economic outlook should keep investors routing money back into safe-haven dollar assets such as U.S. Treasury debt.

"The dollar is in this unusual spot of responding more to the data's message for risk appetite than for Fed policy now that dollar rates are approaching zero," said Alan Ruskin, chief international strategist at RBS Global Banking and Markets in Greenwich, Connecticut.

Some strategists said they were cheered by Obama, who said he was moving quickly to fill Cabinet positions in his administration.

Obama's comments sent "a strong message that he is already on the job," said Greg Salvaggio, senior vice president for capital markets at Tempus Consulting in Washington. "He is showing he will be ready to hit the ground running."

(Additional reporting by Gertrude Chavez-Dreyfuss and Vivianne Rodrigues in New York; Editing by Chizu Nomiyama)

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Forex losses send S.Korea's Daewoo Ship into red

SEOUL, Nov 14 (Reuters) - Daewoo Shipbuilding (042660.KS: Quote, Profile, Research, Stock Buzz), the world's third-largest shipbuilder, said on Friday that it suffered a huge foreign exchange-related loss for the third quarter, sending its bottom line into the red.

The dockyard operator said in a regulatory filing that for the July to September period it recorded 231.5 billion won ($166.1 million) in losses from foreign exchange derivative investments as the won unexpectedly tumbled against the dollar.

The loss in the non-operating item was equivalent to about 13.1 percent of the company's capital base.

As a result, for the third quarter Daewoo saw a net loss of 84.9 billion won, versus a 114.6 billion won profit a year earlier, a company spokesman said.

Operating profit was 107 billion won and sales stood at 2.66 trillion won for the third quarter, he said.

For the nine months to September, Daewoo's foreign exchange-related losses totalled 380.1 billion won.

Shares in Daewoo soared almost 15 percent Friday after preferred bidder Hanwha Group signed a memorandum of understanding to acquire a controlling stake in the shipbuilder.

Daewoo's top shareholder Korea Development Bank also said in a statement that a consortium led by Hanwha was expected to soon launch due diligence on the shipbuilder for three to four weeks. (Reporting by Seo Eun-kyung; Editing by Jonathan Hopfner)

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FOREX-Euro slides vs dlr, yen before euro zone GDP, G20

* Euro/dlr falls 1 pct, euro/yen down 1.5%

* Higher European shares do little to boost risk demand

* Investors await EZ GDP, G20 meeting in Washington

By Naomi Tajitsu

LONDON, Nov 14 (Reuters) - The euro fell against the dollar and the yen on Friday, brushing off an early rise in European shares as investors awaited data on euro zone growth that was expected to show the region has fallen into recession.

Figures earlier in the day showing France had managed to eke out positive growth in the third quarter did little to help the single European currency, while traders also continued to dump higher-yielding currencies ahead of a meeting of G20 economic leaders later in the day.

"Risk aversion is very high and comments from policymakers at the G20 meet could set currencies off again ... so we're probably in for another day of choppy trading," said Philip Shaw, chief economist at Investec.

By 0900 GMT, the euro was 1 percent lower at a session low of $1.2683, nearing a two-week low of $1.2387 hit on Thursday.

The single European currency also struggled against the low-risk, low-yielding yen, falling 1.6 percent to 122.83 yen. A 3 percent rise in European shares .FTEU3 offered little joy to the struggling euro.

Despite its broad weakness, the euro hovered near a record high against sterling hit the previous day as investors are convinced recession in the UK will be more severe than in the euro zone. The pair traded at 85.40 pence, near an all-time high of 86.62 pence.

Sterling suffered across the board, hovering near a 6-1/2 year low against the dollar of $1.4555 hit on Thursday.

The dollar fell 0.7 percent to 96.88 yen.

DATA, G20 AHEAD

Third-quarter euro zone growth data due at 1000 GMT is expected to show a 0.2 percent fall. This would follow a similar slide in the previous three months and show the region has entered a technical recession.

Data announced earlier in the day showed the French economy grew 0.1 percent July-September [nPAB004497], and analysts said the unexpectedly strong figures may suggest that an excessively weak euro zone growth reading was unlikely.

Still, market participants said the euro would stay under selling pressure in volatile trade as investors continue to dump risky assets before the G20 meeting begins in Washington later in the day.

Heading into the G20 meeting, analysts were wary that the event would yield major changes in the international financial structure, which would likely keep investors away from taking on risky positions and continue to boost the dollar and the yen.

"The best that might occur would be a reiteration of commitments by governments to cooperate in reigniting global activity and possibly some increase in support for IMF lending from large surplus/reserves rich countries," analysts at Barclays said in a research note.

They added the risks stemming from the gathering included the possibility disagreements between nations on the causes of the crisis and long-term financial market reforms obscure the common ground on immediate policy needs, which could slow the recovery of the financial system. (Reporting by Naomi Tajitsu)

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FOREX: Ringgit Ends Firmer Against US Dollar

KUALA LUMPUR, Nov 14 (Bernama) -- The ringgit closed firmer Friday against the US dollar amid risk appetite improvement, dealers said.

At 5.00pm, the local currency was stronger against the greenback at 3.5930/5980 compared with 3.5980/5000 yesterday.

The dealers said that gains in local stocks also provided some support to the local unit where sentiment was boosted by the government's stimulus package announcement.

"During the trading, the local unit movements were tied to the local stock market between 3.59 and 3.60," one of the dealers said.

However, the gains were limited with some players concerned over the global financial system, she added.

In late trading today, the ringgit rose against other major currencies.

The local unit was higher against the Singapore dollar at 2.3696/3752 from 2.3743/3783 yesterday and also against the Japanese yen at 3.7057/7116 from 3.7589/7621 previously.

The ringgit strengthened against the British pound at 5.3475/3563 from 5.3574/3622 yesterday but it weakened against the euro at 4.5635/5709 from 4.4903/4942 previously.

-- BERNAMA

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FOREX-Dollar, yen rises on weak data, equities

* Euro/dlr down more than 1 pct

* GDP data confirms single currency zone in recession

* Weaker equity moves dampen risk demand

* Investors eye G20 meeting in Washington

(Adds quotes, updates pries, changes byline, changes dateline, previous LONDON)

By Wanfeng Zhou

NEW YORK, Nov 14 (Reuters) - The U.S. dollar and the yen rose against the euro on Friday as a gloomy global economic outlook added to worries on Wall Street, raising investor demand for safe-haven assets.

Adding to pressure on the euro was data confirming that the euro zone is in its first ever technical recession. The gloomy news followed Thursday's German growth data showing two consecutive quarters of contraction in the zone's biggest economy.

The dollar briefly extended losses versus the yen as risk aversion rose following worse-than-expected retail sales data. But the pair has since rebounded after Federal Reserve Chairman Ben Bernanke said central banks are ready to do more to ease credit strains and support economic growth.

"The retail sales data was definitely weaker than expected, both on the overall number and excluding autos," said Dustin Reid, senior currency strategist at RBS Global Banking & Markets in Chicago. "I still think the negative correlation between equities and the dollar is the main trading theme."

"As for Bernanke's comments, I don't see a whole lot there that hasn't been said already. Central banks being ready to ease more is pretty obvious and markets have priced that in," Reid added.

In early New York trading, the euro was 1.4 percent lower on the day at $1.2653, nearing a two-week low of $1.2387 hit on Thursday.

The single European currency also struggled against the low-risk, low-yielding yen, falling 2.3 percent to 122.01 yen.

The euro zone economy contracted 0.2 percent for the second time in a row quarter-on-quarter in the July-September period, an official estimate showed [nLE565143].

Against the yen, the dollar fell 1.2 percent to 96.45.

G20 EYED

Traders said deleveraging and risk aversion would continue to dominate sentiment in volatile trade as G20 nations gather in Washington on Friday.

Analysts were wary on prospects for the event to yield major changes in the international financial structure, which would likely keep investors away from taking on risky positions and continue to boost the dollar and the yen.

"Markets are likely to be disappointed by the G20 meeting as the statement is unlikely to deliver much more than a call for a broad fiscal policy response without any specific measures or targets," currency strategists at BNP Paribas wrote in a note.

Sterling continued to hover near a record low against the euro hit the previous day as investors are convinced a recession in the UK will be more severe than in the euro zone. The pair traded at 85.69 pence , near an all-time high of 86.62 pence.

Sterling suffered across the board, hovering near a 6-1/2 year low against the dollar of $1.4555 hit on Thursday.

(Additional reporting by Steven C. Johnson and Veronica Brown in London; Editing by Chizu Nomiyama)

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UPDATE 1-Ranbaxy posts qtrly loss on forex, U.S. problems

NEW DELHI, Oct 31 (Reuters) - Ranbaxy Laboratories (RANB.BO: Quote, Profile, Research), India's top drug maker by sales, on Friday reported a net loss for the September quarter due to problems in the U.S. market and foreign exchange losses due to a weaker rupee.

Ranbaxy, in which Japan's Daiichi Sankyo (4568.T: Quote, Profile, Research) owns a controlling stake, has been marred by allegations that it sold misbranded or adulterated drugs in the United States. The company has denied the allegations.

The U.S. Food and Drug Administration has cited the company for failing to fix numerous record-keeping and other operational problems, and last month banned roughly 30 Ranbaxy-made generic drugs until the problems were resolved.

"The quarter also had its challenges including unprecedented forex movement and some losses relating to the turn of events on the USFDA front," Chief Executive Malvinder Singh said in a statement.

The rupee fell 8.4 percent against the dollar between July and September, causing foreign exchange losses.

New Delhi-based Ranbaxy said it posted a consolidated net loss of 3.95 billion rupees ($80 million) in its fiscal third quarter ended September, compared with a profit of 2.07 billion rupees reported a year earlier.

Revenue rose 14 percent to 18.88 billion rupees.

Analysts in a Reuters poll had expected net profit of 420 million rupees on sales of 19.82 billion rupees.

Parent Daiichi Sankyo, Japan's No. 3 drug maker, on Friday booked a lower profit in its first half and cut its annual operating outlook by 8 percent. [ID:nT282378].

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Forex reserves at healthy level despite big drop

KUALA LUMPUR: Malaysia’s foreign exchange reserves fell a staggering RM26bil in a fortnight to RM345.5bil but was still healthy enough by all accounts when measured against the standard yardsticks.

The fall in forex reserves was not explained by Bank Negara in its bi-weekly statement of assets and liabilities but analysts point out the dramatic drop coincided with the terrible month of October when the financial crisis and stock market losses accelerated.

In a statement, Bank Negara said the international reserves amounted to RM345.5 billion (equivalent to US$100.2bil) as at Oct 31.

It said the reserves position was sufficient to finance 8.1 months of retained imports and was 3.7 times the short-term external debt, levels that are deemed healthy internationally.

Foreign exchange reserves hit a peak on June 30 when it reached RM410.9bil, around the time when commodity prices, including that of crude oil, were close to their peaks.

Crude oil price reached its all-time high of US$147 a barrel in July but started to slide precipitously later. Commodity prices such as crude palm oil also declined dramatically during the month.

Supporting foreign exchange reserves was the still strong trade surpluses registered by the country and the continued inflow of foreign direct investments.

Even with those two sources of cash, the outflow was still large, which Jupiter Securities head of research Pong Teng Siew attributed to several factors.

Apart from the repatriation of portfolio capital during the black October month for the stock market, he thinks investors too may have pulled money from the bond markets judging by the increase in yields during the last two weeks of October.

Another reason might have been multinational companies repatriating dividends earlier than normal – which traditionally takes place during the final quarter of the year – given the scarcity of funds in the US and European markets during the height of the financial crisis.

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FOREX-Dollar climbs, yen gains, risk aversion stays high

* Dollar broadly firmer; yen up on risk aversion

* Weaker stocks drive currency movements

* Month-end rebalancing flows underpin dollar

(Adds quotes and detail, updates prices)

By Naomi Tajitsu

LONDON, Oct 31 (Reuters) - The dollar rose against most major currencies on Friday as global share prices bumped lower on fears about a possible recession, keeping investors risk averse which also boosted the yen.

Stocks took little joy in an interest rate cut by the Bank of Japan, following similar moves by central banks including in the United States and China this week seeking to limit the economic damage inflicted by the credit crisis.

European shares stumbled one percent after Japan's Nikkei stocks average .N225 shed five percent on Friday as investors were unconvinced that a 20 basis point rate cut by the BOJ would do much to stop the economy slowing.

Recession fears and the credit crisis have driven down share prices. The Nikkei posted a 24 percent fall this month -- its biggest ever -- while European shares were also en route to their worst month on record.

Analysts said weak stocks were slamming high-yielding currencies as investors spurned the carry trade, where they borrow low-yielding currencies like the yen to pick up higher-yielding assets.

"Foreign exchange markets remain very jittery. Once again, the strongest performers in the last 24 hours have been the dollar, Swiss franc and most of all, the yen," said Tom Levinson, forex strategist at ING.

"So it's still very much a case of safe-haven, low-yielding currencies performing more strongly."

A sharp deterioration in the global economy is keeping expectations high that both the European Central Bank and the Bank of England will cut rates next week by 50 basis points. [ECB/INT] [BOE/INT]

Figures on Friday showing a fall in euro zone inflation boosted the argument for a rate cut by the ECB, which until recently had been wary of loosening policy because of global price pressures [ID:nBFA000757].

At 1128 GMT, the euro was down one percent at $1.2769, while it fell 1.9 percent against the yen to 124.95 yen. The dollar was down 0.8 percent at 97.81 yen.

Despite the dollar's losses against the yen, analysts said it would be supported, especially against the euro, by funds who need the U.S. currency for month-end window dressing purposes.

"Volatility is the watchword today," said Adam Cole, global head of currency strategy at RBS Capital Markets in London. "Large flows for hedging and rebalancing at the month end when the market is thin will likely prompt high volatility."

Other market participants said that the euro's sharp drop following a climb to around $1.33 on Thursday suggested that very few traders were comfortable taking outright short positions in the dollar.

Sterling was down around 1.3 percent against the dollar, but off session lows on news that UK banking giant Barclays PLC (BARC.L: Quote, Profile, Research, Stock Buzz) secured $12 billion in new capital [ID:nLV571355].

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