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WORLD FOREX: Further Losses For The Dollar; Aussie Rallies

-- Fed's accommodative tone continues to weigh on dollar

-- Euro trades at highest since Dec. 21, Australian dollar near three-month high

-- Report that country's private sector creditor have reached agreement fuels optimism

-- But conflicting headlines temper investors' enthusiasm

By Jessica Mead

Of DOW JONES NEWSWIRES

LONDON -(Dow Jones)- The dollar extended its losses against other currencies in European trading Thursday, pushing the euro to its strongest level against the buck in more than a month and lifting the Australian dollar to near three- month highs.

The yen also regained some lost ground against the U.S. currency, having depreciated through most of the week in the wake of weak Japanese trade data, as traders pared back their expectations for U.S. interest rate hikes even further.

The dollar was slammed in late New York and Asian hours after Federal Reserve officials sounded a more accommodative tone and said they expected short-term U.S. interest rates to stay close to zero until late 2014, longer than previously indicated.

Accentuating the greenback's softer performance in European trade was an unsourced Greek newspaper report that private-sector creditors were willing to accept a coupon rate below 4% on the new Greek bonds issued in the event of a successful debt restructuring accord, as well as a strong short-dated Italian debt auction.

The euro rose to as high as $1.3175, effectively placing under water any outstanding negative euro bets made since Dec. 21.

However, a senior German government official sounded a more cautious tone, saying Germany didn't expect a key report on Greece's debt restructuring and fiscal reforms to be ready until early February.

Strategists also urged investors to think twice before jumping on the back of the euro's rally.

"The newsflow is quite conflicting. I would be careful with some of the moves we are getting on back of those headlines," said Ian Stannard, senior currency strategist at Morgan Stanley.

Adam Cole, chief currency strategist at RBC Capital Markets, was also cautious. He pointed out that if the Greek paper report was true, it "remains subject to approval from euro-zone finance ministers and the International Monetary Fund and, as such, the potential for disappointment remains high."

With the Greek talks still casting a shadow over the single currency, market participants were more inclined to look for gains in non-European currencies.

Among them was the Australian dollar which climbed to as high as $1.0690 against the dollar, its highest since Oct. 31.

Elsewhere, a poor U.K. January retail sales survey showing the lowest sales volume since March 2009, pushing the pound to its weakest level against the euro so far this year.

Still to come are U.S. December durable goods sales and weekly jobless claims data at 1330 GMT, followed by new U.S. home sales at 1500 GMT.

At 1130 GMT, the euro was trading at $1.3161 against the dollar, compared with $1.3107 late Wednesday in New York, according to trading system EBS. The dollar was at Y77.54 against the yen, compared with Y77.78, while the euro was at Y102.03 compared with Y101.96. Meanwhile, the pound was trading at $1.5693 against the dollar, compared with $1.5659 late Wednesday in New York.

The ICE Dollar Index, which tracks the greenback against a basket of currencies, was at 79.200 compared with 79.482 late Wednesday in New York.

A summary of key levels for chart-watching technical strategists is below:

Forex spot:       EUR/USD    USD/JPY    GBP/USD    USD/CHF

Spot 1133 GMT     1.3153     77.54      1.5682     0.9177
3 Day Trend       Bullish    Bullish    Bullish    Bearish
Weekly Trend      Bearish    Range      Range      Bearish
200 day ma        1.3587     78.56      1.5820     0.9039
3rd Resistance    1.3229     78.28      1.5846     0.9340
2nd Resistance    1.3215     77.96      1.5780     0.9254
1st Resistance    1.3199     77.67      1.5772     0.9221
Pivot*            1.3053     77.88      1.5624     0.9254
1st Support       1.3095     77.41      1.5600     0.9114
2nd Support       1.3060     77.34      1.5561     0.9066
3rd Support       1.3025     77.25      1.5536     0.9000


Forex spot:       AUD/USD

Spot 1133 GMT     1.0665
3 Day Trend       Bullish
Weekly Trend      Bullish
200 day ma        1.0243
3rd Resistance    1.0770
2nd Resistance    1.0754
1st Resistance    1.0690
Pivot*            1.0554
1st Support       1.0620
2nd Support       1.0575
3rd Support       1.0428

-By Jessica Mead, Dow Jones Newswires; +44 (0) 20 7842 9256, jessica.mead@ dowjones.com;@djfxtrader/@jessicacmead

(Dow Jones Technical Strategist Francis Bray contributed to this story.)

  (END) Dow Jones Newswires
  01-26-120732ET
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