COMMENT-FX reaction to tariffs certainly novel, perhaps wrong

March 4 (Reuters) - Rather than seek safety in the dollar in the aftermath of an intensification of a trade dispute, the U.S. currency has been aggressively sold which is certainly novel, and perhaps wrong.

Stock markets have sold-off, albeit following a huge rise, and this risk averse reaction for equities would usually stoke demand for the world's safest asset.

Instead, the dollar has been slammed to a year low versus the yen and pound and toward one for the euro.

Not only are traders opting to purchase riskier currencies, they are adding to an already record wager that USD/JPY falls, and boosting an existing short position versus the pound.

Before the new tariffs, traders had pared two thirds of existing EUR/USD short positions and a shift to longs may follow a move above this year's nearby high at 1.0535.

Movement suggests that traders don't see the growing trade dispute as a cause for concern when equities clearly do. The robust state of equity markets since the shock of the global financial crisis is central to investing, with every negative situation that has followed resulting in stimulus and spending which have been channelled into stocks.

Moves for currencies suggest investors are looking for a bounce at the beginning of a correction that could run much further given the huge extent of most stock market rises.

If stocks fall further, the dollar, which has been shunned, could rise rapidly. Oil which has dropped in tandem with equities is cause to eye a weaker dollar.