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NEW YORK, Nov 15 (Reuters) - The U.S. dollar rose against the euro but slid against the yen on Thursday, as ongoing credit market concerns and weak stock markets led investors to pare back on short positions in the greenback.
Uncertainty about losses from the U.S. subprime mortgage crisis continued to pervade markets. Standard & Poor's cut its long-term credit rating on Bear Stearns Cos (BSC.N: Quote, Profile, Research), while the investment bank is expected to report its first-ever quarterly loss. In addition, General Electric Co (GE.N: Quote, Profile, Research) said on Wednesday its short-term bond fund had run into trouble and all its outside investors have liquidated their holdings.
Persistent concerns about the lending environment have caused some currency traders to trim bets against the dollar and reduce yen carry trades, in which the low-yielding Japanese currency is borrowed to fund purchases of higher-yielding ones.
"Risk aversion remains the guiding principle in foreign exchange markets today, with further financial sector write-downs negatively impacting stock market performance," said Michael Woolfolk, senior currency strategist with The Bank of New York Mellon in New York.
"Declines in equity prices are keeping yen carry trades sidelined, with the greenback on the receiving end of a mild safe-haven bid," Woolfolk said in a research note.
The dollar was down 1.0 percent on the day against the Japanese currency at 110.31 yen <JPY=>, within sight of 18-month lows of 109.10 yen set this week.
But the euro was down 0.3 percent at $1.4616 <EUR=>, more than a cent below a record high of $1.4752 set last week, according to Reuters data.
Against the yen, the euro was down 1.3 percent at 161.26 yen <EURJPY=>.
"If we see the market take the euro below $1.45, then the euro will drift to the $1.43 to $1.42 range," said Adam Hewison, president of INO.com in Shady Side, Maryland. "Overall, the market looks like it's overdone on dollar selling."
The value of the net short position in the U.S. dollar among currency futures traders on the Chicago Mercantile Exchange rose to $32.54 billion in the week to Nov. 6, up from $30.73 billion in the prior week, according to Reuters data.
The U.S. dollar index of six currencies (.DXY: Quote, Profile, Research) has fallen around 9.0 percent to record lows in 2007, largely because of darkening prospects for U.S. economic growth during a sharp housing sector slowdown.
However, the U.S. dollar was little changed by news the United Arab Emirates is under mounting pressure to unpeg its currency, the dirham <AED=> from the greenback. For more see [ID:nL15238313].
"The fact is that this trend is inevitable from an economic point of view," said Marco Spaltro, currency economist at IDEAglobal in London. "As the economy is not moving following the U.S. any more, maintaining a peg 100 percent with the dollar is becoming too costly on the inflation side, with the risk of social unrest in the gulf states."
Data showing benign U.S. core inflation in October and higher-than-expected regional U.S. business activity in November did not have lasting impact on currencies.
"All in all, the trends that were in place before the numbers are still intact," said Camilla Sutton, currency strategist at Scotia Capital in Toronto.
The U.S. dollar shot up 1.9 percent against the Canadian dollar to C$0.9847 <CAD=> after a report showed Canadian manufacturing sales at the lowest since October 2006.
The high-yielding Australian dollar fell 1.1 percent <AUD=> against the greenback and the New Zealand dollar also fell 1.1 percent <NZD=> to US$0.8867 and US$0.7549, respectively.
Sterling fell to a three-week low against the dollar, hit by an unexpected fall in retail sales <GBP=>. The pound fell 0.5 percent to $2.0437.
The pound has lost around 3.3 percent since reaching a 26 year high above $2.1100 last week. (Reporting by Nick Olivari, Kevin Plumberg and Walker Simon)