Tuesday May 19, 2009 - 20:29:19 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar down as recovery hopes dent safe-haven flow
* Optimism about global economy damps safe-haven demand
* Record low U.S. housing starts limit dollar's losses
* Sterling rises, Aussie dollar hits seven-month high
* Strong German ZEW sentiment survey lifts sentiment
(Adds quotes, updates prices)
By Wanfeng Zhou
NEW YORK, May 19 (Reuters) - The U.S. dollar fell on
Tuesday as a rise in equity markets worldwide and growing
optimism that the global recession is moderating eroded its
Data showing improving business sentiment in Germany and
news that several major U.S. banks are asking to repay
emergency funds they received from the government bolstered
confidence in the global economy and the banking system.
Improved risk appetite also lifted sterling above $1.55 to
its highest this year and pushed the Australian dollar to a
seven-month high versus the greenback.
"I think the key driver right now for the FX market is the
outlook for global growth," said Camilla Sutton, senior
currency strategist at Scotia Capital in Toronto.
"What we've seen in the last 24 hours are some indications
that have given reason for the market to expect a little bit
better global growth outlook than they had at the end of last
The greenback tends to fall when risk appetite rises as
investors move money out of safe-haven dollar-denominated
assets into riskier investments. Hopes that the global economy
has turned a corner have stung the dollar in recent sessions.
In late New York trading, the ICE Futures' dollar index, a
measure of the dollar's value against six major currencies,
fell 0.6 percent to 82.087 .DXY. The index has lost more than
5 percent since it hit a roughly one-month high in April.
The euro traded at $1.3633 <EUR=>, up 0.6 percent on the
day, although it was off the day's highs at $1.3668, according
to Reuters data.
German data showed investors and analysts grew much more
optimistic in May that economic conditions will be better late
this year, with the monthly ZEW poll on economic sentiment
hitting its highest since June 2006. For more see
Technical analysts now expect the euro to test last week's
high around $1.3721; a breach could pave the way for a move
The euro rose 0.4 percent against the yen to 130.94
<EURJPY=>, while the dollar was off 0.2 percent at 96.04 yen
NOT A 'STRAIGHT LINE'
Losses in the dollar were limited, though, by a government
report showing U.S. housing starts and permits unexpectedly
fell to record lows last month. The data doused the view that
the housing market was stabilizing, denting optimism in the
But analysts pointed out that as an economy recovers from
any recession, some disappointing data is normal.
"We're not going to have a straight-line recovery," said
Brian Kim, currency strategist at UBS in Stamford, Connecticut.
"We may be hitting a bottom, but we still need time for reality
to catch up with expectations."
Scotia Capital's Sutton added that while the housing
numbers are "dismal," the markets are looking out six months,
and "the combination of fiscal stimulus and monetary stimulus
will be very good for the economy in the next six months."
In other currency trading, sterling <GBP=D4> jumped against
the dollar, rallying above $1.55 to its highest this year at
$1.5525, as pessimism about Britain's economy and financial
sector eased. It last traded at $1.5487, up 0.9 percent on the
The Australian dollar hit a seven-month high at US$0.7785
<AUD=D4> and was last up 1.3 percent at US$0.7751, boosted by a
rise in oil prices. The New Zealand dollar <NZD=> rose 1.3
percent to US$0.6018.
(Additional reporting by Gertrude Chavez-Dreyfuss; Editing by
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