Dollar softens, commodity currencies benefit from oil rally

By Ian Chua

SYDNEY (Reuters) - The dollar nursed broad losses early on Wednesday as investors cut crowded long positions in the lead-up to the Thanksgiving holidays, and amid heightened geopolitical tensions after Turkey downed a Russian warplane.

It was one of the most serious publicly acknowledged clashes between a NATO member country and Russia for half a century and prompted President Vladimir Putin to warm of "serious consequences".

The dollar index slid to 99.615, recoiling from an eight-month peak of 100.000 set on Monday. Against the yen, the greenback dipped to a 1-1/2 week low of 122.31 and has since edged back to 122.57.

Investors generally shrugged off data showing the U.S. economy grew at a healthier clip in the third quarter than initially thought, an outcome that supported the case for the Federal Reserve to hike interest rates next month.

"Robust U.S. domestic demand growth remains the main driver of U.S. economic activity and justifies a December Fed funds rate increase. Still, we expect the Fed's tightening cycle to be gradual which will limit significant USD upside," said Elias Haddad, senior currency strategist at Commonwealth Bank.

The euro rose as far as $1.0673 , before losing steam to last trade at $1.0646.

The greenback, however, rose against the Turkish lira to above 2.8700 . It initially firmed on the rouble, but ceded ground as the Russian currency benefited from a rally in oil prices.

Other commodity currencies also fared well. The Canadian dollar climbed to C$1.3306 per U.S. dollar , pulling well away from Monday's trough of C$1.3436 per dollar.

The Australian dollar hit a one-month high of $0.7266 . It was already bid after Reserve Bank of Australia Governor Glenn Stevens, in a speech late on Tuesday, dampened expectations for further rate cuts.

There is little in the way of major market moving data out of Asia on Wednesday. Minutes of the Bank of Japan's last meeting are due later in the morning, but no surprises are feared.

(Reporting by Ian Chua; Editing by Eric Meijer)