* Dollar index increases for third straight session
* Greenback brushes off worsening U.S. trade gap
* Yen, Swiss franc retreat as Wall Street pares early losses
(New throughout, updates exchange rates, market activity, comments; new byline, changes dateline, previous LONDON)
By Richard Leong
NEW YORK, Feb 6 (Reuters) - The dollar rose on Tuesday to its highest level in more than a week against a basket of currencies as traders piled back into the greenback after a global stock market rout wiped out $4 trillion in value.
The dollar index climbed for a third straight session from a three-year low on buying from traders closing out bearish bets against the dollar versus the euro, sterling and riskier, commodity-linked currencies.
On Monday, the Dow and S&P 500 U.S. stock indexes posted their biggest declines since August 2011. This led traders to buy dollars even though the stock sell-off also led investors to moderate their expectations of Federal Reserve rate hikes.
"The dollar is shrugging off expectations of fewer Fed rate hikes," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. "It's enjoying a short-covering and a broader safe-haven bid instead."
Traditional safe-haven currencies like the Japanese yen and Swiss franc lost ground against the greenback as Wall Street opened with losses that were much smaller than what the futures market had signaled in overnight trading.
"Wall Street will dictate where the rest of the stock markets and currency market go," Manimbo said.
At 10:23 a.m. (1523 GMT), the dollar index was up 0.48 percent at 89.984.
The dollar rose 0.15 percent to 109.25 yen and gained 0.82 percent to 0.9390 Swiss franc.
The yen and franc receded from session highs when Tokyo's Nikkei index at one point posted its biggest point drop since November 1990. Currencies at risk during a global equity slump are higher-yielding commodity-linked currencies like the Australian dollar and emerging market currencies, which often slide when risk appetite drops, analysts said.
These currencies reversed much of their initial losses on Tuesday in step with U.S. stock prices.
The Australian dollar fell 0.17 percent to $0.79, while the Mexican peso fell 0.03 percent to 18.77 peso.
On Wall Street, the S&P 500 was down 0.23 percent at 2,642.84. It shed 4.1 percent on Monday, its biggest daily percentage point loss since August 2011. Currency traders shrugged off data that showed the U.S. trade deficit widened in December to its biggest level in nine years. ========================================================
Currency bid prices at 10:24AM (1524 GMT)DescriptionRIC Last U.S. ClosePct Change YTD Pct High BidLow Bid
Previous Change
Session Euro/DollarEUR=$1.2321$1.2367 -0.37% +0.00%+1.2433 +1.2316Dollar/Yen JPY=109.2500 109.0900+0.15% +0.00%+109.6400 +108.4700Euro/Yen EURJPY= 134.61 134.92-0.23% +0.00%+135.7800 +133.9900Dollar/Swiss CHF=0.9387 0.9314+0.78% +0.00%+0.9397 +0.9307Sterling/DollarGBP=1.3864 1.3957-0.67% +0.00%+1.3999 +1.3837Dollar/CanadianCAD=1.2519 1.2537-0.14% +0.00%+1.2565 +1.2503Australian/DollAUD=0.7864 0.7877-0.17% +0.00%+0.7890 +0.7836ar Euro/Swiss EURCHF= 1.1568 1.1518+0.43% +0.00%+1.1602 +1.1514Euro/SterlingEURGBP= 0.8884 0.8858+0.29% +0.00%+0.8910 +0.8856NZ Dollar/DolarNZD=0.7290 0.7263+0.37% +0.00%+0.7318 +0.7258Dollar/NorwayNOK=7.8485 7.8346+0.18% +0.00%+7.8888 +7.7805Euro/NorwayEURNOK= 9.6707 9.6884-0.18% +0.00%+9.7479 +9.6594Dollar/SwedenSEK=7.9917 7.9793-0.23% +0.00%+8.0090 +7.9291Euro/SwedenEURSEK= 9.8473 9.8704-0.23% +0.00%+9.8899 +9.8436
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates in 2018 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>(Additional reporting by Tommy Wilkes in New York; Shinichi Saoshiro in TOKYO; editing by William Maclean, Alexander Smith and David Gregorio)
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