LONDON (MarketWatch) - The dollar was firmer against all major counterparts other than the Japanese yen Tuesday, as risk appetite faded and equity markets weakened.
Meanwhile, Russia's central bank refrained from intervening in currency markets as the ruble weakened through important support levels, signaling of the "devaluation process" for the currency, economists said.
The dollar index , a measure of the greenback against a trade-weighted basket of six major currencies, rose to 86.013 from 85.977 in late North American trading Monday.
The dollar was slightly lower against the Japanese yen at 97.88 yen, down from 97.93 yen. The euro was off 0.4% against the yen to 124.37 yen.
The euro fell slightly to $1.2707 against the dollar from $1.2750 from $1.2712 Friday, but off a session high of $1.2925.
The British pound retreated to $1.5570 against the dollar from $1.5616 late Monday. The pound was little changed against the euro at 81.59 pence. Sterling fell to an all-time low against the single currency Monday as the euro rose above 82 pence.
The yen, and to a lesser degree the dollar, have served as barometers of risk aversion in global financial markets, gaining when fears are running high. Deleveraging and liquidation in the face of financial turmoil sharply boosted both currencies in October.
Asian and European equities were on the defensive Tuesday morning. See Asia Markets. See Europe Markets.
Strategists at BNP Paribas said further signs of relief in world money markets should help to eventually stabilize equities. Close attention will be paid to commercial-paper market data set for release Thursday, they said.
Meanwhile, the euro eventually worked lower, despite a stronger-than-expected rebound by the ZEW German economic sentiment indicator, gleaned from a monthly survey of financial and investment professionals.
The ZEW sentiment index rebounded to -53.5 in November from -63.0 the previous month, but remains very low amid worries about the German economic outlook.
A decline in the ZEW inflation expectations index, meanwhile, should offer the European Central Bank further reassurance that commodity prices won't contributed to sharp rise in core inflation, said Jennifer McKeown, European economist at Capital Economics.
McKeown expects the ECB to cut its key rate to 1.5% from its current level of 3.25% by mid-2009.
Meanwhile, the British Retail Consortium's monthly barometer released Tuesday showed sales fell 2.2% on a same-store basis compared to October 2007. That marks the first drop in total sales since April 2005, the BRC said.
In the U.K. property sector, the Royal Institution of Chartered Surveyors reported that completed sales in the three months ending in October fell to 10.9 per surveyor -- the lowest level recorded since the survey began in 1978. See full story.
The Office for National Statistics reported that Britain's global goods deficit narrowed to 7.5 billion pounds in September from 8 billion pounds in August, with export growth outpacing imports.
The data indicate that sterling's fall has now started to reduce the trade deficit after an initial lag, economists said.
Economists at Danske Bank noted that the Russian central bank refrained from intervening in the market to defend the ruble as it weakened against a dual-currency basket - 45% euro and 55% U.S. dollar.
The central bank had previously defended the currency near the rate of 30.40 rubles per basket, where it had traded since early September. On Wednesday, it slipped to 30.79 before settling around 30.70 - a 1% decline, the Danske economists said.
Bets on a weaker ruble are likely to increase, they said.
"Market participants are certainly becoming more nervous as expectations rise for more ruble weakness to come," the economists wrote. The Russian central bank "will have to tread very carefully going forward if it is to avoid creating panic in the market."
