FOREX-U.S. dollar rises as stocks, commodities fall

* Euro reverses gains vs dollar, trades below $1.50

* Sterling rises after Friday's losses, but outlook grim

* China should increase EUR, JPY holdings - Chinese report

* BoC's Carney repeats concern on Canadian dollar strength (Recasts, updates prices, adds comment)

By Gertrude Chavez-Dreyfuss

NEW YORK, Oct 26 (Reuters) - The dollar rallied from 14-month lows versus the euro on Monday, as riskier assets such as U.S. stocks and commodities fell, prompting investors to lock in recent gains in other currencies.

Analysts also said investors felt uncomfortable pushing the euro higher given the huge amount of bearish trades on the dollar, which suggests a near-term recovery in the U.S. currency is on the horizon.

"Most major currencies including the euro are running out of steam. Specifically, the euro's earlier rally wasn't really supported by data as we saw the German consumer confidence was actually weaker," said Kathy Lien, director of FX research at GFT in New York.

Figures earlier on Monday revealed German consumer sentiment unexpectedly declined for the first time in just over a year going into November. For more see [ID:nLN478719].

The euro fell to session lows at $1.4951 EUR=EBS on the EBS platform after hitting a 14-month high at $1.5064 earlier. By midday, it was at $1.4957, down 0.3 percent on the day.

The ICE Futures dollar index .DXY, a gauge of the greenback's performance against six other major currencies, was up 0.28 percent at 75.682.

It was a complete turn of events for the dollar, which struggled earlier, especially in the wake of a report saying China should increase its holdings of euros and yen in its foreign reserves.

The story out of China was an opinion piece in the Financial News, a paper published by the People's Bank of China. The report said the dollar should remain the principal currency in China's foreign exchange reserves but that the share of euros and yen should increase. [ID:nPEK285229]

Scotia Capital's senior currency strategist Camilla Sutton, in Toronto, said the Chinese report was nothing new and the impact was pretty much short-lived. "The official who made the comment was not even senior and everyone knows it takes time to diversify out of the U.S. dollar because there really is no alternative."

HEAVY SHORT DOLLAR POSITION

Analysts also said the heavy short positioning on the dollar has hovered in the background, making investors hesitant to sell more dollars despite the currency's weak fundamentals.