* Dollar recovers from earlier losses
* China plan to exit regular intervention negative for euro
* Australian, New Zealand dollars continue gains
By Laurence Fletcher
LONDON, Nov 19 The dollar recovered early losses
to trade higher against the euro on Tuesday after the Chinese
central bank said it would gradually exit from regular
intervention in the foreign exchange market.
Zhou Xiaochuan, head of the People's Bank of China, said in
a book on reforms published on Tuesday that China will gradually
expand the yuan trading band to help make the currency more
flexible and market-driven. This followed reform plans last week
to let the market play a "decisive" role in the economy.
Analysts said the plan could be negative for the euro
because the central bank automatically diversifies into euros a
large portion of the dollars it receives when it intervenes in
the currency market.
"Fewer U.S. dollars will need to be recycled into euros,"
said Adam Myers, senior FX strategist at Credit Agricole.
He added, however: "People have leaped on the comments. But
with no timing, who knows when they're going to do it."
The euro was down 0.1 percent at $1.3493, having
earlier been as high as $1.3544.
Traders said the German ZEW survey weighed slightly on the
euro. Although the economic sentiment reading hit its highest
level in four years in November, the survey's current conditions
index fell and was below forecasts.
The dollar index was down marginally at 80.771, but
up from a low of 80.56 earlier in the session.
The dollar has been under pressure since remarks last week
by Janet Yellen, the U.S. Federal Reserve's chief in waiting,
widely interpreted as confirming her dovish
Since Yellen's remarks at her Senate confirmation hearing,
U.S. Treasury yields have fallen, dragging down the
dollar index, which is correlated to bond yields.
On Monday Federal Reserve Bank of New York President William
Dudley said he was "more hopeful" about the U.S. economy but
also said he expected "very accommodative" monetary policy to be
in place "for a considerable period of time".
"Fed tapering still remains the market's main obsession,"
said Jane Foley, senior currency strategist at Rabobank.
"What we've had with QE (quantitative easing) is a
recognition that it could be some time before the Fed moves away
Investors were looking ahead to the release on Wednesday of
minutes from the Fed's October meeting for clues to how long it
will maintain its monthly $85 billion of bond purchases.
The Australian dollar continued its strong run
against the U.S. dollar, gaining 0.5 percent to $0.9420, while
the New Zealand dollar was up 0.2 percent at $0.8346.