SYDNEY (Reuters) - The U.S. dollar swung lower in very thin trading conditions on Monday, losing its shine to a surging gold price and more dovish comments from U.S. central bankers.
The euro hopped to $1.4916, reversing an early slip to $1.4834 and threatening Friday's high at $1.4935. Against a basket of currencies the dollar .DXY dropped 0.4 percent to 75.378, having been as high as 75.879 on Friday.
Traders said the dollar had initially tried to extend last week's short-covering rally but ran into selling from Asian sovereign accounts just as gold streaked to a record high of $1,165.35 an ounce.
It was also hit by comments from St. Louis Federal Reserve President James Bullard that the central bank should keep alive its mortgage-related assets purchase program beyond a planned end-date to give policy-makers more flexibility.
The Financial Times had an interview with Chicago Fed President Charles Evans in which he suggested interest rates would not be lifted for a long time to come, maybe late 2010 or even 2011.
Those comments came in contrast to comments on Friday from European Central Bank President Jean-Claude Trichet that banks risked becoming addicted to easy money. Trichet said he would make sure that extraordinary liquidity measures would be phased out in a timely and gradual fashion.
"The Fed is sounding like they mean it about keeping rates low for an extended period -- way into 2010 if not 2011," said a trader at an Australian bank.
"That just added to the dollar's offered tone and it doesn't take a lot of flow to move currencies when the market is so thin," he added, noting the absence of Tokyo for a holiday had made conditions illiquid.
Trade was likely to be thin all week given U.S. markets will be shut on Thursday for Thanksgiving, and the lack of liquidity could lead to volatile moves.
The dollar was little changed on the yen at 88.90 yen, from 88.97 in New York, but remains in a gradual downtrend that stretches back four weeks now. Support seen under 88.70, with resistance at 89.10 yen.
Sterling edged up to $1.6514, from $1.6502 on Friday, while the Australian dollar bounced to $0.9180, from $0.9153.
Minutes of the Federal Reserve's last policy meeting are due on Wednesday and could repeat the low rates message.
Analysts at Barclays believe the minutes should show the Fed's reference to resource utilization and inflation in its policy statement was intended to underline its commitment to keeping rates low.
"This language was not meant to signal that the extended period phrase would soon be removed," they said in a note to clients. "We expect the FOMC's updated economic projections to continue to show moderate economic growth and modest inflation."
(Reporting by Wayne Cole; Editing by Jonathan Standing)
