TOKYO, Nov 19 (Reuters) - The dollar and the yen rose on Thursday as investors, watching soft equities performances and capital controls in emerging markets, closed out positions in riskier currencies and bought back the two low-yielders.
The higher yielding New Zealand and Australian dollars, which have been favoured plays against both the dollar and yen this year, both fell, dropping 1 percent against the yen, while the euro retraced a chunk of its gains made the previous day against the dollar.
Traders and analysts cited several factors as playing into the move, including yen-buying by Japanese exporters ahead of a three-day weekend, weak share markets and policy issues in New Zealand.
Markets were also watching steps to tighten controls on capital in emerging markets such as Brazil and South Korea, although South Korea said its new measures were aimed at boosting the soundness of banks' assets and not at FX volatility. [ID:nSEO196381] [ID:nN18128104]
"Markets are finding it difficult to get traction," said Mitul Kotecha, global head of FX strategy at Calyon in Hong Kong.
"U.S. equities were softer overnight and momentum for risk is seeping away a little going into the year-end, and it's as if we're seeing a lot of squaring of positions and short covering going into the year end."
The dollar index .DXY, a measure of its performance against a basket of six currencies, rose 0.1 percent to 75.278, after dipping to a 15-month low of 74.679 on Tuesday.
The euro fell 0.6 percent to 132.90 yen EURJPY=R while the New Zealand dollar fell about 1.4 percent to 65.71 yen NZDJPY=R and the Australian dollar slid 0.8 percent to 82.32 yen AUDJPY=R.
Both the Australian and New Zealand dollars have failed to break to new 2009 highs against the yen since hitting the year's peaks in October.
In New Zealand, comments from the main opposition party leader that it would seek to change a policy that sets the central bank's main role as controlling inflation through interest rate moves added to the kiwi's fall. [ID:nWEL486009]
Analysts said, however, the plan was unlikely to come to much with an election not due until 2011, although alongside the weaker equity markets and a fall in yields, it weighed on the kiwi, which fell 1 percent on the day to $0.7372 NZD=D4.
"The world markets have become quite long in kiwi dollar as they have in Aussie. When you have a little scare, it flushes a lot of long positions out," said Imre Speizer, strategist at Westpac.
The Australian dollar slipped 0.6 percent to $0.9236 AUD=D4 from $0.9292 in late U.S. trade, well below a 15-month peak at $0.9407 set on Monday. Expectations for a December rate hike have cooled recently, sapping some of the currency's strength.
