Dollar Buyers Could Take A Breather. By Katie Martin

How long can the dollar keep this up?

For weeks now, the U.S. currency has been unable to do any wrong as far as investors are concerned. Never mind that some nerves are starting to build over the possibility that the world's biggest economy could eventually face its own debt crisis; the currency has climbed regardless of the forces at play.

The euro-zone debt crisis has pushed the buck higher against the euro as traders flee the troubled 16-country currency. Meanwhile, sabre-rattling on the Korean peninsula, bouts of nerves on global financial markets and even poor U.S. economic data have pushed the dollar higher as investors fear a fresh leg of global recession and seek safety.

In short, it has looked like the dollar can't lose.

Looking at early European trading Tuesday, that familiar pattern may hold for some time; the fresh downgrade to Greek debt overnight has once again sparked a move out of risky bets and into the greenback.

But some market watchers are starting to wonder whether this trend may pause. After all, the dollar is being used as a refuge only because, as Goldman Sachs put it, it's the "best-looking horse in the glue factory."

A fully fledged slide in the dollar is almost certainly unrealistic, particularly given developments overnight. But a rare tinge of weakness is likely to slow further gains from here.

A big reason for this is that traders have already gorged on dollars, leaving little scope for further feasting.

Much has been made of reports that speculative funds have been dumping euros on a record scale in recent months. But positive bets on the dollar have quietly crept up too.

The benchmark measure for these types of trades, released each Friday by the Commodity Futures Trading Commission, doesn't strip out positive and negative bets on the dollar itself. Instead it measures positions taken on, say, sterling and the euro against the buck.

Cobble these numbers together though, and the aggregate long, or positive, bet on the dollar was the biggest on record last week, according to research by Credit Agricole. Just as some believe there's no-one left to sell the euro, it could be that there's no-one left to buy the dollar. Expect some dollar-weakening profit-taking on those positions over the course of this week as a result, Credit Agricole said.

The other big factor here is that investors are enjoying phases, albeit brief ones, of being somewhat less spooked. As we saw from the euro's rally early Monday, it takes only the absence of bad news to prompt a run-up in risky bets and a drop in the dollar. What's more, some blasts of decent euro-zone economic data helped the single currency to climb for most of the day, despite the Greek downgrade in U.S. trading hours.

Few if any currency market watchers believe this is a big turning point. The euro is not about to shrug off the mess of the past six months and shoot back up to $1.50.

Still, the euro got as high as $1.23 against the dollar Monday, despite the Greek downgrade, marking a climb of over 3% from its lowest point of the month. Meaningful dollar pull backs are a distinct possibility.

In early European trading Tuesday, the euro was once again under pressure at $1.2179 against the dollar from $1.2225 late in New York Monday, according to trading system EBS. The dollar was lower against the safe-haven yen at Y91.20 from Y91.47, while the euro was also lower at Y111.09 from Y111.81. Sterling was down at $1.4711 from $1.4750.

The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of other major currencies, was higher at 86.856 from 86.637.