U.S. dollar falls as safe-haven demand wanes

NEW YORK - The U.S. dollar fell to its lowest level in more than seven weeks against major currencies on Monday as gains in equities encouraged investors to take on more risk, denting the greenback’s safe-haven appeal.

By (Reuters)

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Published: Mon 27 Jul 2009, 8:33 PM

Last updated: Thu 2 Apr 2015, 8:30 AM

European shares edged higher as recent economic data and positive results on the U.S. corporate earnings front boosted optimism about the global economic outlook.

This has weighed on U.S. dollar and the yen, which typically fall when risk appetite improves, and pushed the euro to its highest since early June against the greenback.

“The positive performance of global equities remains one of the main drivers,” said Omer Esiner, senior market analyst at Travelex Global Business Payments in Washington.

“Risk appetite remains at elevated levels and that has depressed demand further for safe-havens like the dollar and the Japanese yen.”

The ICE Futures U.S. dollar index, a measure of its performance against six major currencies, fell to a low since early June of 78.396. It last traded at 78.592, down 0.2 percent.

Investors were wary, however, ahead of U.S. GDP data and record sales of U.S. Treasuries later in the week. The market was also keeping an eye on talks between top U.S. and Chinese officials in Washington on Monday and Tuesday for any comments regarding the U.S. currency.

The euro was also buoyed by data showing German consumer sentiment at its highest level in over a year. It rose 0.5 percent to $1.4272, after climbing as high as $1.4299, its highest in more than seven weeks and not far off its 2009 peak of $1.4337 hit in early June, according to Reuters data.

The euro also rose against the yen to its strongest in more than three weeks at 136.05 yen, and last traded up 0.8 percent at 135.68 yen.

“We have started very much where we left off on Friday, with higher equities and greater risk appetite,” said Kenneth Broux, market economist at Bank of Scotland Treasury.

“The performance of the euro has also been quite remarkable and we may be seeing a process of the euro catching up with many other pro-risk currencies,” he added.

Data from the Commodity Futures Trading Commission on Friday showed currency speculators nearly doubled their bets against the dollar in the week ended July 21, with the value of dollar net short positions reaching its highest since mid-July 2008.

Commodity fx gain

The Canadian dollar — which is particularly sensitive to movements in the oil price — jumped as high as C$1.0779 per U.S. dollar, its strongest since October 2008.

The Australian dollar climbed around 1 percent to a high of $0.8259, the highest level since early June, before pulling back to last trade up 0.7 percent at US$0.8229. The New Zealand dollar gained 0.2 percent to $0.6570.

But analysts noted the recent surge in market optimism that has helped fuel a rally in equities may begin to fizzle out as caution sets in ahead of U.S. gross domestic product data on Friday.

The numbers are expected to show the economy contracted for a fourth consecutive quarter in April-June, the first time that has happened in records dating to 1947. Forecasts are for a contraction at an annual rate of 1.5 percent.

Meanwhile, the U.S. Treasury sells a record $115 billion this week and the bond and currency markets are keen to see how demand holds up given rising stock markets and a potentially improving economic backdrop.



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