* Australian dollar soars after GDP reading
* Solid global economic data lifts risk appetite
* Investors await Friday's nonfarm payrolls report
(Adds details, updates prices. Changes byline)
By Aleksandra Michalska
NEW YORK, Sept 1 (Reuters) - The U.S. dollar fell against
major currencies on Wednesday after upbeat data around the
world soothed worries about the health of the global economy,
boosting investors' appetite for riskier assets.
The U.S. manufacturing sector grew more quickly than
expected in August, China's factory activity regained momentum,
and Australia's economy grew at its fastest pace in three years
last quarter.
The euro climbed above $1.2850 earlier and the Australian
dollar soared 2 percent against the U.S. currency as stocks and
commodities rallied amid reduced fears of a renewed global
slowdown.
Analysts cautioned that the risk rally could be short lived
as the global economy is by no means out of the woods. They
expect safe-haven currencies to remain firm after the yen hit a
15-year high last week on fears the U.S. economic recovery was
faltering.
"What we've seen is a bit move away from the U.S. dollar,"
said Brendan McGrath, manager of business solutions at Custom
House, a Western Union company, in Victoria, British Columbia.
"Risk is back in favor a little bit today, mainly due to
the good Australian and Chinese data," he said.
In late afternoon trading, the ICE Futures U.S. dollar
index, which tracks the greenback versus a basket of six
currencies, fell 0.8 percent to 82.500.
The euro rose 0.9 percent to $1.2800.
The Australian dollar jumped more than 2 percent to
US$0.9092. It had earlier hit a session peak of US$0.9098, the
highest in three weeks, after Australian gross domestic product
data revived expectations of a further rise in interest rates.
In the United States, the Institute for Supply Management's
index of national factory activity rose to 56.3 in August from
55.5 in July. That was above market expectations for 53.0 and
helped investors shrug off a separate report showing U.S.
private employers unexpectedly cut 10,000 jobs in August.
The government's monthly report on payrolls is a key
indicator on the health of the labor market.
YEN LONGS
Against the yen, the dollar rose 0.3 percent to 84.41 yen.
It had earlier hit a session low of 83.69 yen, according to
Reuters data, within striking distance of a 15-year low of
83.58 set on electronic trading platform EBS last Tuesday.
The euro climbed 1.2 percent to 108.02 yen. The yen earlier
came under pressure after Japanese ruling party powerbroker
Ichiro Ozawa, challenging Prime Minister Naoto Kan in a party
leadership vote, said he would implement steps, including
intervention, if the yen rose sharply.
The yen's rapid advance in recent weeks prompted Japanese
authorities to announce easing measures on Monday. A strong yen
makes Japan's exports more expensive and reduces their
competitiveness. Traders and analysts said that, short of
direct intervention in the foreign exchange markets, the yen is
bound to test its all-time high against the dollar of 79.75 yen
set in April 1995.
Last week's data from the Commodity Futures Trading
Commission on currency speculators showed net long yen
positions rose to 51,069 contracts and total long yen positions
hit 63,086 contracts.
Scotia Capital says record net yen long positions posted at
65,920 contracts on March 25, 2008, with record yen longs at
94,654 on March 4, 2008.
The larger the number of long yen contracts, the more
speculators will have to scramble to reverse positions to
prevent losses in the event of a decline in yen and a rally in
the dollar. The next report is due out on Friday.
(Additional reporting by Vivianne Rodrigues, Wanfeng Zhou and
Nick Olivari in New York; Editing by Leslie Adler)