WORLD FOREX: Dollar Dips On IMF Gold Sale, Rebounds On RBA

The dollar dipped Tuesday in Asia after the International Monetary Fund made a big gold sale to India, but the U.S. currency rebounded as Australia's central bank signaled it may pause its monetary tightening next month.

The moves were mostly modest in thin trade as Japanese markets were closed for a national holiday.

The euro and gold gained at the dollar's expense as news that the IMF sold 200 metric tons of gold to the Reserve Bank of India stoked expectations that central banks, especially in Asia, will continue to shift away from their reliance on the U.S. currency.

But the buck got a lift against the Australian dollar, as well as the euro, when the Reserve Bank of Australia--after raising rates by a quarter percentage point for a second month in a row, as expected--said the tightening "will work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead."

The euro was at $1.4781 at 0430 GMT, according to EBS via CQG, after rising above $1.4800 on the IMF gold sale. It was quoted at $1.4768 in late North American trading. The euro was at Y133.37 from Y133.44. The dollar was at Y90.24, up from Y90.07. The Australian dollar was at US$0.9011, down from US$0.9090 before the RBA decision.

The IMF's gold sale was at an expected average price of $1,045 an ounce, far higher than the $850 price the institution had projected only a few months ago. It rekindles expectations that central banks will keep diversifying their reserves away from the U.S. currency.

Although this adds to general unease about the dollar's global status, the gold sale itself isn't expected to have major market implications.

"Diversification has been an ongoing story for Asian central banks," said Westpac senior commodity analyst Justin Smirk. "Gold holdings in comparison to dollar holdings are low. But it's not possible for them to change rapidly out of the dollar. This story is one of evolution, not revolution."

Conversely, the dollar likely won't get much lasting benefit from the job-well-done tone of RBA Gov. Glenn Stevens's comments because market participants don't think the central bank is finished raising rates.

There is some chance of a pause in December, but it is all about watching the economic data, said Annette Beacher at TD Securities.

"It does seem to suggest now that they moved in October and November, there is some possibility of a pause," she said. "However, should we get another string of decent labor market data, house prices, inflation--that still leaves December fairly on the agenda."

FOREX-U.S. dollar and yen slip in choppy trading

* U.S. manufacturing sector grew in October -ISM

* U.S. stocks reverse morning's gains

* Fed official says U.S. banks still at risk (Updates prices, adds quotes, details, changes byline)

By Gertrude Chavez-Dreyfuss

NEW YORK, Nov 2 (Reuters) - The dollar and yen slid on Monday as reports showing further evidence of an economic recovery around the world dampened safe-haven demand for the U.S. and Japanese currencies.

U.S. data showed sharp improvements in manufacturing, construction and housing, encouraging investors to buy riskier assets with higher yields.

By early afternoon, the three major U.S. stock indexes had turned negative on concerns about banks' soured loans and as investors worried about whether the seven-month rally has run out of steam. Earlier, stocks had climbed about 1 percent on the strong economic data.

Commodity prices, on the other hand, held gains, lifting commodity-linked currencies such as the Australian and Canadian dollars.

"The pattern in which stocks and the euro are correlated is intact. As stocks rise, so does the euro," said Marc Chandler, global head of FX strategy at Brown Brothers Harriman in New York.

"But I don't think we're out of this consolidation and correction in stocks, and even in the euro. I'm not convinced that the downside correction in the euro is over."

For much of the past year, the euro has had a positive correlation with moves in the stock market, falling when good economic data and rising share prices boost risk appetite. The 25-day correlation between the euro and the S&P 500 is at a robust 0.83 on Monday, according to Reuters data.

In early afternoon trading, the euro rose 0.2 percent to $1.4749 after climbing as high as $1.4845 EUR=, according to Reuters data. U.S. stocks have fallen from the session's highs and this has somewhat pressured the euro.

Analysts said the slide in stocks and the euro began after a Federal Reserve official said U.S. banks remained at risk over soured property loans. [ID:nWEQ003541]. That pushed the euro to as low as $1.4728.

Against the yen, the dollar gained 0.3 percent to 90.33 yenJPY=EBS after falling as low as 89.18 yen per dollar on electronic trading platform EBS. The euro rallied 0.5 percent to 133.23 yen EURJPY=R.

The ICE Futures U.S. dollar index .DXY, a measure of the greenback's value against a basket of six major currencies, was up 0.1 percent for the day at 76.378.

Losses in the dollar and the yen accelerated earlier in the session after U.S. manufacturing activity rose to its highest level in 3-1/2 years last month, offering hope the budding economic recovery would be sustained. See [ID:nN02437173].

Other reports showed pending home sales, for homes under contract to be sold, unexpectedly surged in September and construction spending posted its largest gain in a year in September.

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