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FOREX-Risk currencies' rally hits speed bump, yen rebounds

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* Aussie, kiwi erase gains as yen rebounds

* Sterling firm on rising BoE rate hike expectations

* Bitcoin slips from record high, ether firmer

By Hideyuki Sano

TOKYO, Oct 21 (Reuters) - Commodity currencies slipped from multimonth highs on Thursday after their rally on strong raw material prices was sideswiped by sudden selling against the yen, in what many traders described as inevitable profit-taking after a long rally.

Traders saw no clear trigger for the move, though some traders mentioned unsubstantiated speculation that cash-strapped China Evergrande could make an announcement soon as it battles with possibility of default.

The Chinese property giant abandoned plans to sell a $2.6 billion stake in one of its key units on Wednesday.

The Australian dollar turned 0.2% lower against the dollar at $0.7501 after reaching a 3 1/2-month high of $0.75465 earlier in the day.

Against the yen, the Aussie dropped 0.5% to 85.58 yen after hitting a near four-year high of 86.25.

The New Zealand dollar, which had risen for the past 10 consecutive days against the Japanese currency in its longest rising streak since 2014, also dropped 0.3% to 82.04 yen .

The U.S. dollar slipped 0.2% versus the yen to 114.12 yen , veering off its four-year peak of 114.695 hit on Wednesday.

"I expect a bit of correction in risk assets ahead of a lot of events coming up in the next week, such as the Bank of Japan's (BOJ) policy meeting," said Masaru Ishibashi, joint general manager of Sumitomo Mitsui Bank.

"Ahead of Japan's election (on Oct. 30), there are a lot of talks that a cheaper yen is hurting the economy. BOJ Governor Haruhiko Kuroda will be surely asked about it."

The BOJ will hold its policy meeting on Oct. 27-28.

European currencies were firmer, with the euro trading flat at $1.1664, staying close to Tuesday's three-week peak of $1.1670.

Sterling dipped 0.1% to $1.3807 but was supported on firming perceptions the Bank of England (BoE) will raise interest rates as soon as next month to curb inflation, despite softer-than-expected UK price data on Wednesday.

Against the euro, sterling was near its highest levels since February 2020, at 84.33 pence per euro. "It's as if the BoE is stealing the spotlight from the Fed as it looks likely to raise rates before the Fed," said Kyosuke Suzuki, president of Financial algotech company at Ryobi Systems.

"What could be the game changer, though, is if the Fed is also jumping on the bandwagon of global rate hikes much sooner than expected," he added.

The dollar's index was little changed at 93.612, holding barely above Tuesday's three-week low of 93.501.

It has declined 1.1% from a 15-month peak hit last week. Expectations that the Fed could soon scale back pandemic-era stimulus has underpinned the dollar over the past few months. The Federal Reserve is widely expected to announce tapering of its bond purchase at a policy meeting in early November, but it is expected to distance itself from future rate hikes for now.

Money markets are pricing in one U.S. rate hike in 2022, after the Fed is expected to have finished its tapering process in the middle of next year.

In cryptocurrencies, bitcoin slipped 1.3% to $65,145 , after having hit a record high of $67,016 the previous day.

Ether climbed 0.5% to $4,183, edging near its record peak of $4,380 hit in May.

(Reporting by Hideyuki Sano; Editing by Sam Holmes, Ana Nicolaci da Costa and Gerry Doyle)

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