FOREX-Dollar drifts down, euro up as yuan speculation ebbs
* Dollar on heavy side as sparring over currencies continues
* Speculation of any yuan shift recedes further
* Euro edges up but ranges limited; US retail sales awaited
TOKYO, Nov 16 (Reuters) - The dollar drifted lower on Monday and the euro edged up as rhetoric over China's yuan currency policy increased, although market speculation of any near-term yuan appreciation receded.
The United States and China sparred over exchange rates at a meeting of Asia Pacific leaders on Sunday, a move that quashed expectations that China may allow the yuan scope to rise in coordination with U.S. President Barack Obama's first trip to Beijing. [ID:nSP43459] [nOBAMAASIA]
The euro firmed against both the dollar and the yen, although the gains were muted and it remained below the $1.5000 level EUR= that is proving a hurdle to its eight-month long rally.
"Any immediate move from China is unlikely but since subjects for meetings between the U.S. and China include trade and currency issues, players are keeping an eye on them," said Kazuyuki Kato, treasury department manager at Mizuho Trust & Banking.
"But there does not seem to be any speculative trading today in relation to the China-U.S. meeting."
The euro rose 0.4 percent on the day to $1.4966 EUR= and gained 0.3 percent to 134.11 yen EURJPY=R.
The euro had dipped below 133.00 yen on Friday, with some talk investors had initiated shorts in the hope a rising yuan would take some pressure off the euro.
The dollar index .DXY =USD fell 0.4 percent to 75.042, holding well within a downtrend channel that stretches back to May. It had fallen on Friday after data showed a wider U.S. trade deficit and weaker consumer sentiment.
The U.S. trade gap unexpectedly widened by 18.2 percent in September, as imports from China increased. This data came as Obama told other Asia Pacific leaders in Singapore that failure to rebalance the global economy would lead to further crisis.
Such rebalancing, say analysts, would mean further falls in the dollar and gains in Asian currencies, including the yuan. But in offshore markets investors turned more cautious about betting on any gains soon. [ID:nSHA173153]
The dollar was slightly softer against the yen at 89.57 yen JPY= but above this month's weakest point at 89.18.
Trading ranges were small as the market watched comments from the International Monetary Fund saying a stronger yuan was part of the reforms Beijing needed to boost domestic consumption, while a Chinese Commerce Ministry official said the country should keep the currency stable as it was beneficial to a global recovery. [ID:nPEK158236] [ID:nBJB003572] Continued...
