Euro, yen lead gains as USD suffers positioning setback

By Ian Chua

SYDNEY (Reuters) - The euro held on to solid gains early on Thursday and stayed above the $1.10 big figure after comments from a central banker suggested markets had been expecting too much stimulus from the European Central Bank.

The common currency last stood at $1.1021 , having scaled a one-month peak of $1.1044. The move extended last week's 2.8 percent short-covering rally after the ECB fell well short of delivering the aggressive easing that markets expected.

Responding to accusations of miscommunication, Governing Council member Ewald Nowotny on Wednesday said it was market analysts that failed to assess properly signals the ECB was sending and they should have paid more attention to economic fundamentals.

The greenback also suffered its biggest one-day drop in over three months against the yen, breaking out of a 122.23-123.77 range seen in the past month. It slid 1.2 percent and was last at 121.53 .

Traders said the yen benefited from its safe-haven status as risk appetite continued to be suppressed by jitters over a rout in commodity prices.

Oil had a choppy session but eventually ended lower for a fourth day after the market ignored an unexpected drawdown in U.S. crude stockpiles to focus on a build in distillates.

With the euro and yen on the front foot, the dollar index slid to its lowest in over a month. The index was last at 97.372.

Analysts said the market also appeared to be cutting crowded long dollar positions ahead of next week's Federal Reserve policy review, where a rate hike is well anticipated.

"The extent of USD weakness over the past week reduces the danger of a post-Fed squeeze on USD longs and makes it less likely that the Fed Chair will dwell heavily on foreign exchange risks when she speaks at the press conference," analysts at BNP Paribas wrote in a note to clients.

The dollar managed to hold its ground against the Canadian dollar, which languished near an 11-year trough of C$1.3623 per USD set on Tuesday. It last traded at C$1.3569.

Another notable mover was the New Zealand currency, which rallied after the Reserve Bank of New Zealand cut interest rates but said further easing should not be needed.

The kiwi dollar climbed to a high of $0.6760 , sitting on a gain of almost two full U.S. cents.

Rising in tandem, the Australian dollar reached a high of $0.7245 , pulling away from a two-week low of $0.7172.

Australia's employment data due at 0030 GMT should provide fresh cues for traders. After the previous outsized jump of nearly 60,000 jobs, the consensus is for a fall of 10,000 jobs in November.