* Euro back in favour after selloff early in the week
* Commodity currencies also firmer as sentiment recovers
* Demand of higher yields persists, yen reverses course
* Japan trade surplus below expectations; weighs on yen
By Ian Chua and Masayuki Kitano
SYDNEY/SINGAPORE, April 20 (Reuters) - The euro and commodity currencies such as the Australian dollar rebounded on Wednesday, as investors bought them again after a mild shake-out of stretched long positions at the start of the week.
Gains in U.S. and European shares on upbeat corporate results helped soothe market sentiment after nerves were rattled on Monday by S&P's warning on U.S. credit ratings and on fears that Greece will have to restructure its debt.
While those problems remain unresolved, the moves showed investors continue to favour higher-yielding currencies at the expense of the dollar and yen, and a rise in Asian equities underscored a rebound in risk-taking sentiment.
"The fact that there was little emotional reaction after the S&P move perhaps helped to improve investors' sentiment towards risk," said Makoto Noji, senior strategist at SMBC Nikko Securities in Tokyo.
The yen got no help from data showing that Japan logged a smaller-than-expected trade surplus in March and that exports fell more than expected year-on-year, in a sign of the disruptions caused by a massive earthquake and tsunami that struck Japan's northeast on March 11. [ID:nL3E7FJ0B1]
"There is little doubt that this is a factor for the yen to weaken," said Daisuke Karakama, market economist for Mizuho Corporate Bank in Tokyo.
The data showed that car exports fell, likely due to disruptions to manufacturing supply chains, while imports of oil-related products rose on the back of high commodity prices, he said, adding that this trend may continue in April and May.
"Two factors that had supported yen strength until now are shrinking U.S.-Japan interest rate differentials and exporter flows. Today's data shows that one of those is weakening," Karakama added.
The dollar rose 0.4 percent from late U.S. trade on Tuesday to 82.91 yen . Dollar-buying by Japanese importers helped lend the dollar support against the yen, traders said.
The euro climbed 0.8 percent to 119.27 yen , pulling away from a two-week trough of 116.49 yen hit on EBS earlier this week.
The euro rose 0.4 percent versus the dollar to $1.4387 , having clawed above short-term resistance around the $1.4365/80 area. Both the euro's 100-hour moving average and the 61.8 percent retracement of its recent $1.4521 to $1.4156 slide both lie near that region.
