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FOREX-Dollar pauses for breath as fragile pound edges up

       By Alun John and Tom Westbrook
       LONDON/SYDNEY, Sept 27 (Reuters) - The dollar took a
pause on Tuesday in what has been a relentless climb higher as
under-fire sterling as well as the euro and Japanese yen
recovered some ground from multi-year lows, but medium-term
fundamentals were still in the greenback's favour.
    Sterling climbed over 1% to $1.0810, on track for
its biggest daily percentage gain in nearly seven weeks, the
euro rose 0.2% to $0.9629, and the dollar slid 0.3%
against the yen to 144.28.
    The decline in the dollar was broadly in line with a
recovery in markets' sentiment towards riskier assets, which
also boosted European stocks and U.S. share futures, and was
helped by U.S. treasury yields steadying after their recent
gains.
    "We've seen some people trimming their long dollar positions
a bit, but we're looking to the New York open to see how those
treasury yields are going to play throughout the day," said
Simon Harvey,  head of FX analysis at Monex Europe.
    "All it needs is them to pick up a bit and the risk
environment becomes less supportive and then you start wondering
what happens to UK investor sentiment. This brief flurry of
strength in the pound feels like it's on shaky ground."
    Tuesday's moves were minor compared to the dollar's
significant recent gains. The euro was still near its 20-year
trough hit a day earlier, and the yen was just off its 24-year
nadir hit last week before Japanese authorities intervened to
strengthen the currency.
    Sterling was not too far from its record low of $1.0327 hit
Monday, the end of a plunge that began Friday when markets were
spooked by Britain's gambit of relying on unfunded tax cuts to
spur growth, which also sent short-term gilt yields up 100 basis
points in two days.
    Investors will watch an appearance by the Bank of England's
chief economist, Huw Pill, at a panel event beginning at 1100
GMT.
    The central bank on Monday said it would not hesitate to
change interest rates and was monitoring markets "very closely",
though did not take any immediate action.
    Broad fundamentals are still pointing to a stronger dollar
in the medium term.
    "Everyone's got this hope that the dollar is peaking and
peaking and peaking, but it's just been far too premature," said
Paul Mackel, global head of FX research at HSBC.
    "The Fed is firmly hawkish and global growth is weakening,
and you put those forces together alongside higher elements of
risk aversion - it's all pointing to a strong dollar if not a
strengthening dollar."
    The dollar index was at 113.6, down 0.5% on the day,
but still near its 20 year top of 114.58 hit the day before.
    The Aussie and kiwi, which hit 2-1/2 year
lows on Monday, were also on the rebound, with the Aussie up
0.57% to $0.6490 and the kiwi up 1.2% to $0.5702.
    Bitcoin, which also often moves in line with risk
sentiment, hit a 10-day top and was last up over 5% at around
$20,200
    ========================================================
    Currency bid prices at 1055 GMT
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change
                                              Session
 Euro/Dollar
                              $0.9629         $0.9609    +0.22%          -15.29%     +0.9670     +0.9584

 Dollar/Yen
                              144.2800        144.7000   -0.28%          +25.46%     +144.7050   +144.0800

 Euro/Yen         138.93          139.07     -0.10%          +6.61%      +139.5400   +138.7100

 Dollar/Swiss
                              0.9869          0.9926     -0.56%          +8.21%      +0.9941     +0.9859

 Sterling/Dollar
                              1.0805          1.0690     +1.09%          -20.09%     +1.0837     +1.0651

 Dollar/Canadian
                              1.3677          1.3728     -0.37%          +8.17%      +1.3741     +1.3641

 Aussie/Dollar
                              0.6492          0.6459     +0.51%          -10.69%     +0.6513     +0.6452

 NZ
 Dollar/Dollar                0.5706          0.5635     +1.27%          -16.63%     +0.5722     +0.5635


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 (Reporting by Tom Westbrook; Editing by Sam Holmes and Mark
Potter)

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