Dollar weak near 14-month lows, high yielders gain

A money changer holds a 100-Pakistani Rupee (PKR) note while standing behind his make-shift booth at a street corner in Karachi September 23, 2009.

SYDNEY (Reuters) - The U.S. dollar held near 14-month lows against a basket of currencies on Wednesday, as investors bet on commodity currencies on growing optimism about a global recovery.

The U.S. dollar was also on the defensive after Federal Reserve Vice Chairman Donald Kohn reiterated that U.S. interest rates are going to remain low for some time [ID:nN13198041].

U.S. stock index futures rose in after-hours trade as Intel Corp (INTC.O) posted profits and revenues above forecasts, giving a boost to riskier assets and high-yielding currencies like the Australian and New Zealand dollars.

Also helping sentiment was the Reserve Bank of New Zealand's (RBNZ) decision to remove some of the temporary measures brought in last year to boost liquidity amid the global financial turmoil.

"The Intel results and the RBNZ's move are seen as optimistic signs and highlight the improvement taking place around the globe," Robert Rennie, chief currency strategist at Westpac.

"Intel's results especially stand out, as I don't think the market has been pricing a recovery in the tech sector."

Investors tend to sell the U.S. dollar when economic optimism grows, buying assets like stocks and commodities instead.

The euro climbed to $1.4848, from $1.4827 late on Tuesday when it rose to as high as $1.4876, its strongest level since August 2008. Chartists point the next key level for the euro is at $1.4968, before eventually rising to $1.50.

The dollar index was down at 75.828, not far from its 14-month low of 75.738.

The dollar has come under relentless pressure in the past month on expectations that U.S. interest rates will remain low and on talk that it is becoming the preferred funding currency, replacing the yen, for leveraged carry trades.

The yen was steady at 89.73 per dollar with eyes on the Bank of Japan' two-day policy meet that ends later on Wednesday.

It is expected to focus in downside risks to the economy and signal rates will be kept near zero for a long time even after withdrawal of emergency stimulus measures.

The Aussie was firm near 14-month highs, trading at $0.9067, up from $0.9050 late in New York ahead of consumer-confidence numbers for October. A sharp rise in confidence could cement expectations for more rate hikes.

The New Zealand dollar was also firmer at $0.7380, up from $0.7336 late on Tuesday.

(Editing by Jonathan Standing)