FOREX-Dollar bulls brightened up after data, risk appetite improves

By Ian Chua

SYDNEY, Aug 28 (Reuters) - The dollar held at one-week highs against a basket of major currencies early on Friday, having benefited from upbeat U.S (Other OTC: UBGXF - news) . data and as investors continued to cut back on safe-havens such as the yen.

Commodity currencies including the Australian dollar managed to outperform their U.S. peer after a solid rebound in Chinese equities helped lift risk appetite generally.

The dollar index last traded at 95.758, not far from a one-week high of 96.031 set overnight. Since diving to a seven-month trough of 92.621 on Monday, the index has risen more than 3 percent.

Against the yen, the greenback bounced back above 121.00 , pulling well away from Monday's low of 116.15. The euro came close to $1.1200, having been knocked off its lofty perch above $1.1700.

Sterling extended its decline, briefing dipping below $1.5400 for the first time in over a month. It (Other OTC: ITGL - news) last stood at $1.5412.

Lifting the spirits of dollar bulls, data showed the U.S. economy grew faster than initially thought in the second quarter, an outcome that kept the chance of a U.S. interest rate hike this year on the table.

Analysts at Citi said all four components showed positive revisions: consumer spending, business investment, trade and government outlays.

"Today's GDP adds to the positive flow of domestically oriented U.S. data the Fed desires to see," they wrote in a note to clients.

Expectations for a September move, however, have dwindled after a few Fed officials sounded a bit more cautious, citing global market turmoil and slower Chinese growth.

The market will be keenly waiting for more comments on policy normalisation from Fed officials attending the Aug. 27-29 Jackson Hole Economic Symposium.

The lighter market mood overnight uplifted commodity currencies, which have had a torrid time this week as swings in Chinese equities compounded fears of a slowdown in the world's second biggest economy.

The Australian dollar attempted to reclaim 72 U.S. cents , continuing to recover from a six-year trough of $0.7044 hit on Monday. It's New Zealand peer was close to 65 U.S. cents, off its six-year low of 60 cents.

The recent wild moves in global markets have shaken many investors.

"It'll be a while before we know where the permanent scars are, but in the meantime, it's a reminder to markets not to form overly strong views on such things as when the Fed might start lift-off, or where G3 currencies are headed," analysts at ANZ said in a report.

There is little in the way of market-moving data due in Asia, leaving the focus mainly on Chinese stocks again. (Reporting by Ian Chua; Editing by Eric Meijer)