(Adds quotes and comment, updates prices)
* Dollar pauses for breath at 14-year peak
* Euro back above $1.04
* Swedish crown jumps on Riksbank QE split
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
By Jamie McGeever
LONDON, Dec 21 The dollar took a breather on
Wednesday after reaching a 14-year high the previous day, while
the Swedish crown chalked up its biggest rise in six months
after the Riksbank voted to ease policy further only by the
narrowest of margins.
Sweden's central bank kept interest rates on hold at -0.50
percent and extended its bond-buying programme after a split
board forced Governor Stefan Ingves to use his casting vote for
the first time since 2008.
The crown rose to its highest in more than two months
against the euro.
The dollar drifted lower, meanwhile, giving back some of the
ground gained since the Nov. 8 U.S. presidential election. The
greenback has chalked up all its 4.5 percent gains for the year
since the election, as traders have bet that Donald Trump's
administration will go on a growth-boosting tax cut and fiscal
With no major economic data or policymaker speeches
scheduled and the Christmas holiday approaching, the euro
dragged itself from Tuesday's 14-year low back above $1.04.
The biggest mover was the Swedish crown. With central bank
stimulus, housing debt and private sector borrowing all looking
stretched, according to many economists, foreign exchange
traders bet on this being the beginning of the end of QE.
"This one is probably the last QE extension, in our view,"
said Daniele Antonucci, economist at Morgan Stanley. "Stimulus,
monetary and fiscal, is unlikely to be extended much further."
At 1115 GMT the euro was down 0.7 percent against the crown,
below 9.64 crowns for the first time since October 11
and marking its biggest one-day fall since June 20.
The euro was up 0.2 percent on the day against the dollar,
however, at $1.0405, rebounding from as low as $1.0352 on
Tuesday, a level last seen in January 2003.
Traders are casting a wary eye on Italy's troubled bank
Monte dei Paschi di Siena, which needs to raise 5
billion euros by the end of the year to avoid being wound up by
the European Central Bank.
And dollar bulls say the greenback could resume its climb
later in the day if the Dow Jones Industrials Average hits the
psychological 20,000 level.
"The euro is in a fight between short-covering pressure and
political angst. Economics doesn't come into it at all. If Dow
20,000 is just a number but a magnet all the same, euro parity
with the dollar will be every bit as magnetic," said Kit Juckes
at Societe Generale.
"We'll get there and get over-excited before too long."
The dollar was down 0.3 percent against the Japanese yen at
117.50 yen, down more than one yen from its 10 1/2-month
high of 118.66 touched on Dec 15.
The dollar's trade-weighted index against a basket of six
major currencies, fell 0.2 percent to 103.11. On
Tuesday it hit a 14-year high of 103.65.
U.S. Treasury yields slipped on Wednesday. The 10-year yield
was down a basis point on the day at 2.55 percent,
and almost 10 basis points off last week's two-year peak.
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Reporting by Jamie McGeever; Editing by Robin Pomeroy)