FOREX-Oil bounce helps Norwegian crown, Canadian dollar recover

* Commodity-linked currencies helped by Saudi oil report

* Euro recovers footing after falling to $1.0600

* Dollar index touches 7-month high (New (KOSDAQ: 160550.KQ - news) throughout after oil market move)

By Patrick Graham

LONDON, Nov 23 (Reuters) - The Norwegian crown jumped to its highest in six weeks and the Australian and Canadian dollars recovered on Monday after oil prices jumped on a Saudi government briefing note saying it was ready to cooperate in maintaining stable markets.

The major currencies traditionally linked most closely to prices of global commodities had taken the brunt of another sell off in prices of oil and other raw materials in Asian and European trade.

That all turned round in 20 minutes following initial reports on the Saudi position, despite some scepticism among traders that it pointed to a clear change of the kingdom's position.

"It (Other OTC: ITGL - news) is the oil price move which has done this," said one trader in London, referring to the rise in oil-linked currencies. "U.S (Other OTC: UBGXF - news) . crude oil has spiked by 229 points."

The Norwegian crown rose to its strongest since the start of October at 9.1635 crowns per euro. The Canadian dollar was flat on the day at C$1.3340, having been down sharply.

Even (Taiwan OTC: 6436.TWO - news) after the oil shock, the New Zealand dollar remained the day's biggest loser on major currency markets, down almost 1 percent on the day and suffering from expectations of more cuts in interest rates in New Zealand next year.

The Aussie, more attuned to metals prices than oil, recovered around a third of a cent on the Saudi reports but was still down 0.6 percent on the day at $0.7190.

"When you look at an almost 20 percent fall in iron ore over the last month or so, its no surprise that the Aussie is down like this," said Derek Halpenny, European head of global market research at Bank of Tokyo-Mitsubishi UTJ in London.

"We're still bearish on Aussie on the terms of trade story," he added. BTM have a forecast of $0.68 for the Australian dollar by the end of this year.

On the euro, traders with interest from options markets helped repel a first attack on $1.0600.

Robust sentiment surveys from the euro zone offered the single currency support, but traders and analysts were reluctant to predict any bounce before a European Central Bank meeting next month that is expected to ease monetary policy.

Latest positioning data showed players again increased bets on the dollar against the euro in the week to last Tuesday. The last fortnight has proved more sticky for the U.S. currency, however, raising the prospect that some investors could choose to take profit on its 5 percent surge since mid-October or this year's more than 12 percent gain.

"We got very close to $1.06 so there probably is a good chance we might push through that this week," said Josh O'Byrne, a strategist with Citi. "There's not going to be much to go on though data-wise. The market is long dollars, short euro and I don't expect that we will see much of a squeeze on those positions ahead of next week's ECB." (Editing by Alison Williams)