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Dollar slips after

fund sells options

NEW YORK: The dollar slipped in the late afternoon after a U.S. hedge fund reportedly unloaded part of its positions in yen options and causing a chain reaction of dollar selling in the cash market.

"Somebody with a large postion dumped it in the market," said Charles Spence, dealer at Standard Chartered Bank. "We saw some very large stop loss orders triggered and off we came.

The dollar stabilized after dropping around one yen and almost one pfennig, bouncing off support at 96.50 yen and 1.4650 marks.

"They were selling into a market too thin to withstand selling pressure," said one dealer at a major U.S. investment bank. "They just hit the market at the right time."

At the close, the dollar stood at 97.17/27 yen, down from 98.24/31 yen at the open. It also slipped to 1.4747/57 marks, from 1.4860/70 marks.

"You can't have the kind of runup that we had without taking a pause along the way, but there's no reason for a selloff," said Kevin Harris, international economist at MCM CurrencyWatch.

Early today, the dollar slipped on the announcement that U.S. trade deficit in June grew to $11.3 billion, its second highest level in history.

The White House downplayed the significance of the trade figure, but dealers took the data to heart, expressing their disappointment by bringing the dollar lower against the mark.

On the positive side, the U.S. deficit with Japan shrank slightly, giving temporary support to the dollar,

Dealers were generally wary to push the dollar lower for fear of central bank intervention, which Tuesday catapulted the greenback to six-months highs.

Sterling suffered against the mark after a series of weak economic data made players believe the Bank of England would be hesitant to raise U.K. interest rates.

The dollar stood at 1.2225/35 Swiss francs, down from 1.2356/63 francs at the open, and at Canadian $1.3602/07, down from C$1.3588/93. Sterling closed at $1.5460/70, down from $1.5379/86 at the open, while the Australian dollar stood at $0.7320/25, from $0.7321/26.

At midday, the Morgan Guaranty trade-weighted index stood at 94.8, from 94.5 on Wednesday.-Reuter