Surging commodities and equities sink the greenback NEW YORK (MarketWatch) -- Broad-based selling greeted the dollar on Monday to kick off June, as investors piled into commodities and equities amid hopes the worst of the global recession will soon be over. The dollar index stood at 78.999, down from near 79.226 in late North American trading on Friday. Rising risk appetite has translated into weakness for the dollar, which had gained ground previously on safe-haven flows as financial turmoil and economic fears deepened last fall. Appetite for riskier investments was on the rise "across the board," said Kenneth Broux, an economist at Lloyds TSB in London. "It certainly looks like there is a great acceleration in recent trends." The U.S. dollar remained lower after a Commerce Department report showed personal income and spending came in better than economists had expected, adding to investor confidence that the worst of the financial and economic crisis is over. See more on economic data. The Institute of Supply Management's national index on the health of manufacturers improved more than predicted. The ISM index rose to 42.8 in May from 40.1 in April. Economists surveyed by MarketWatch expected a reading of 42, which continues to show the industry is contracting. The euro rose to $1.4194, after earlier touching its highest level since December, up from $1.4156 late Friday. The dollar changed hands at 94.67 Japanese yen, down from 95.40 yen on Friday. Some analysts also tied the dollar's weakness to General Motors and the automaker's bankruptcy filing. See full story. Strategists at Brown Brothers Harriman said the Chapter 11 filing, which will leave the U.S. government owning a majority stake in GM, fanned worries about U.S. debt levels. Commodity-oriented currencies posted notable gains against the U.S. currency, as crude-oil futures rose more than 1% to more than $67 a barrel. See more on oil markets. Gold futures pressed nearer the $1,000-an-ounce mark, trading up 1% earlier. See more on metals trading. The Australian dollar rose 1.2% on the day to trade at 81.06 U.S. cents, while the greenback fell 1.4% against the New Zealand dollar to NZ$1.5415 and gave up 0.6% against its Canadian counterpart to C$1.0841. The dollar index "steadily gave up all of its gains over the past week on a resumption of yield-seeking appetite and rising expectations that the pace of global economic downturn is easing," wrote analysts at Standard Chartered Bank. They noted that technical measures, including the relative strength index and stochastic readings, indicate the index is heavily oversold, which could lead to choppy price action in the near term. Currency traders also kept an eye on headlines out of China as Treasury Secretary Timothy Geithner made his first visit to the nation as Treasury head. He said China, having has undergone an economic renaissance, must now do its part to lower barriers to U.S. companies seeking access to its fast-growing markets. Geithner also sought to reassure Chinese officials of Washington's commitment to reduce the budget deficit to a "sustainable" level, once the economy begins to recover. See full story. European, U.K. data Activity in the 16-nation euro-zone's manufacturing sector slowed less than previously thought in May, according to the final reading of the Markit euro-zone purchasing managers index released Monday. A similar measure of manufacturing activity in the United Kingdom also rose to its highest level in a year "In the near-term though, the higher manufacturing PMIs will only reinforce the view that the worse of the global recession is behind us, adding on to the improving market sentiment and a dollar negative for now," Brown Brothers analysts wrote. The British pound jumped to a new seven-month high at $1.6392 in recent action, a gain of 1.2% on the day. Sterling's recent gains have been fueled by increased optimism over the banking sector and the global economy, said strategists at Bank of Scotland. The pound has virtually ignored rising political turmoil fueled by public outrage over alleged abuse of parliamentary expenses.

Source