TOKYO, Oct 26 (Reuters) - The dollar fell to a 14-month low against the euro on Monday as a Chinese report saying Beijing should increase its holdings of euros and yen in its foreign reserves led investors to sell the greenback.
The yen also got a boost from the opinion piece in the Financial News, a paper published by the People's Bank of China, which said that the dollar should remain the principal currency in China's foreign exchange reserves but that the share of euros and yen should increase.
The Australian dollar also benefited from the article as investors believe the Aussie has been included in the currencies that China and other central banks have bought to diversify foreign reserves.
"The comments from China are pretty strong and that is supporting the euro," said Tony Bieber, forex analyst at Suncorp.
"This is quite good for the Aussie as those diversifying into the euro are also buying the Australian dollar."
The euro EUR= rose as high as $1.5064 on trading platform EBS, its highest since August 2008, pushing up from below $1.50 in early trade.
The euro's gains were also helped by European Central Bank Governing Council member Christian Noyer making no comment on euro/dollar, which speculators took as an excuse to push the single currency higher.
But the European single currency trimmed gains after the Chinese researcher who wrote the opinion piece said he was expressing purely personal views.
"The news is moving the market this morning to bring euro/dlr higher, with the pair looking very biddish at its lows," said a trader for a Japanese trust bank.
The dollar index, a gauge of the greenback's performance against six other major currencies, fell 0.2 percent to 75.329 .DXY towards a 14-month low of 74.940 touched last week.
The dollar fell 0.3 percent to 91.75 yen JPY=, retreating from a one-month high of 92.23 yen hit on EBS earlier in the day.
The Australian dollar erased its earlier losses and rose 0.3 percent to $0.9241 AUD=D4, rebounding towards a 14-month high of $0.9330 reached last week.
The Aussie traded softly earlier in the day as data showed Australia's third-quarter producer price index (PPI) numbers rose only modestly, taking pressure off the central bank for an aggressive rate rise.
The pound extended losses after data on Friday showed the UK economy was still struggling, disappointing investors who had been paring short positions betting on an early return to growth.
Sterling's drop was compounded by speculation that U.S. interest rates could be headed higher sooner than expected.
The pound GBP=D4 broke past support at $1.6300 to fall as low as $1.6251 from $1.6313 late on Friday when it lost nearly 1.9 percent.
Traders say investors are set to aggressively sell the pound on expectations that a sluggish road to recovery would prompt the Bank of England to keep rates near zero for a long time.
