Dollar retreats from 2-week high vs euro
Thu Jul 30, 2009 4:06am EDT
By Tamawa Desai
LONDON (Reuters) - The dollar was off two-week highs against the euro on Thursday as rebounding share prices bolstered risk sentiment.
China's benchmark Shanghai Composite Index ended 1.7 percent higher, recapturing some of the previous day's five-percent loss after a senior central banker reiterated loose monetary policies would not be reversed.
Tokyo's Nikkei average also closed up 0.5 percent while European shares were up 0.5 percent in early trade.
"There is a general bid tone to high yielders such as the Australian dollar" as U.S. stock market futures indexes pushed higher, said Christian Lawrence, currency strategist at RBC Capital Markets.
"The Chinese stock market is almost acting as a leading indicator for U.S. markets," he added.
At 0748 GMT, the euro was up 0.1 percent at $1.4060. It slid to $1.4007 on trading platform EBS on Wednesday, the lowest since July 15, after rising to $1.4305 the day before.
The Australian dollar was up 0.6 percent at $0.8218.
The dollar index, a gauge of the greenback's performance against six other major currencies, fell 0.3 percent to 79.317. It hit a seven-month low of 78.315 on Tuesday.
But the dollar's losses may be tempered if further profit-taking in riskier assets emerge.
"I personally feel that the market will see further corrective moves before more clues emerge on how the economy will fare after this summer, with the dollar broadly rising and commodities falling," said Kosuke Hanao, head of treasury product sales for HSBC in Tokyo.
Traders were focusing on euro zone economic sentiment data, which is expected to show an improvement to 75.1 in July from 73.3 the previous month.
While that may indicate the worst may be over for the euro zone economy, many analysts still expect the single currency bloc's economy to lag that of most G10 countries, keeping the euro's upside limited.
Market players will also keep an eye on the U.S. Treasury's record $28 billion sale of seven-year notes later in the day, following tepid reception, especially from foreign investors, to auctions of five- and two-year paper earlier in the week.
But analysts said it reflected more a shift by foreign central banks from the longer end of the curve to the shorter end.
"Markets should not interpret weak auctions as a signal that the U.S. will run into new difficulties funding its current spending plans," UBS currency analyst Geoffrey Yu said in a note.
The euro was little changed on the day at 133.38 yen. The dollar dipped 0.1 percent, to 94.88 yen after rising near a three-week high of 95.39 yen on Monday.
The New Zealand dollar initially fell after its central bank kept interest rates at a record low 2.5 percent but left the door open to further cuts while warning that a strong currency was adding to the risks to an economic recovery.
But the kiwi recovered later to trade up 0.2 percent at $0.6528, after falling to $0.6477. It hit a near 10-month high of $0.6635 earlier this week.
(Additional reporting by Satomi Noguchi in Tokyo; Editing by Victoria Main)
