By Kaori Kaneko TOKYO (Reuters) - The dollar clung to gains in Asia on Friday after another sporadic bout of profit-taking in riskier trades that has characterized the currency's eight-month bear trend. But traders said dollar short-covering, prompted by softer equities and a fall in oil, had slowed in Asian time, and the U.S. currency's broad weakness was likely to continue over the longer term. Speculation about a yuan revaluation was also heating up, traders said, after China's central bank referred this week to a new set of benchmarks for determining its value and as U.S. President Barack Obama began a trip to Asia. Dealers and analysts were skeptical, however, that any change would happen soon. In the meantime, investors were questioning how long the dollar's bounce would last. "The retreat in risk-assets such as stocks and oil prompted investors such as hedge funds to buy back the dollar," said Jun Kato, senior chief analyst at Shinkin Central Bank Research Institute. "But the dollar short-covering seems to be losing steam and the dollar bear market looks like it's coming back. But it's hard to bet on a certain direction and build large positions now," he said. The dollar index, a gauge of the greenback's performance against six major currencies, was little changed at 75.577, off a 15-month low of 74.774 but still within a well-defined downtrend channel that stretches back to May. Matthew Strauss, a senior currency strategist at RBC Capital markets, noted the index had formed a double bottom at 74.94 and broken above the 38.2 percent Fibonacci retracement at 75.55. Trendline resistance now came in around 76.02, drawn off a high from mid-May. "A break above this level will question the eight-month bearish U.S. dollar trend and, although we remain dollar bears over the medium-term, a short-term bullish correction will not surprise us," said Strauss. The euro edged up 0.1 percent to $1.4863, having tumbled 1 percent on Thursday when, traders said, investors seemed to have taken profits in the euro after news that Berlin was poised to inject equity capital into WestLB. CHINA ISSUE Some felt the euro's dip was related to speculation China might be prepared to let the yuan rise, albeit slowly. The theory held that a rising yuan would lift other currencies across the region and take some pressure off the euro to appreciate against the dollar. All this was for the longer term, however. "We would not expect a significant move to unfold until the global economy has found its feet and other central banks around the world are starting to rein back their own policy accommodation, which may not happen until well into 2010," said Shaun Osborne, a currency strategist at TD Securities. There were also risks in this scenario for the dollar. In particular, Asian central banks might feel less need to recycle their excess dollars into U.S. Treasuries, fuelling concerns about how the United States would fund its massive budget deficit. Meanwhile, Obama kicks off his first official tour of Asia on Friday, and will attend an Asia-Pacific summit in Singapore later in his trip. High on the agenda will be U.S. calls for Asian countries to do more to stimulate domestic demand instead of relying on exports to America. That would likely require much of Asia, and China in particular, to let their currencies appreciate. EURO ZONE GDP IN FOCUS Euro zone gross domestic product data is also awaited, which could show the area emerging from recession. The euro zone's GDP is expected to have risen 0.5 percent in the third quarter after the economy shrank by 0.2 percent in the second quarter and by 2.5 percent in the first. "Although the dollar edged up a little, the underlying trend is for dollar carry trades on the back of an easy monetary policy in the U.S.," said Hideki Hayashi, global economist at Mizuho Securities. "The euro zone economy is still fragile but if the data shows a recovery, led even by stimulus measures, it's possible that the euro will move back above $1.5000," he said. The dollar was down 0.1 percent at 90.22 yen, having risen as high as 90.62 yen on EBS the previous day. High-yielders succumbed to profit-taking with the Australian dollar at $0.9254, pulling back from a 15-month high at $0.9370 touched on Thursday after a solid jobs report boosted expectations for a rate hike next month.

Source