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FOREX-Dlr up from 4-mth low, yen up as risk rally fades

Published 05/11/2009, 08:04 AM
Updated 05/11/2009, 08:08 AM

* Dollar index up, recovers from 4-month low

* Yen extends gains after HSBC results, high-yielders fall

* Dlr, euro technical levels crack

(Adds quotes, updates prices, changes byline)

By Jamie McGeever

LONDON, May 11 (Reuters) - The dollar rebounded from a four-month low and the yen rose broadly on Monday as investors cashed in on last week's rally in riskier assets such as stocks, boosting the appeal of so-called safer haven currencies.

Commodities fell and bank stocks underperformed broader indices, with HSBC leading the way after it reported first quarter profits were swelled by record results in its investment bank, but would have been down without accounting gains on its debt.

The yen was the main gainer, while the dollar shrugged off growing technical weakness to recover from multi-month lows struck earlier in the global session on hopes the worst of the economic slump and financial crisis is over.

But with the economic outlook still far from certain, investors were reluctant to push riskier assets even higher and instead booked profits, particularly in banking shares and oil.

"The market's seeing a pullback from the overextended risk rally that occurred last week," said Lauren Rosborough, currency strategist at Westpac.

"A lack of significant data and a confluence of views on recent bank stress test results and U.S. labour market data has stalled the recent trend to sell the dollar," she said.

Last Friday the dollar broke below some key technical support levels on daily and weekly charts on an index basis and against the euro, culminating in fresh lows early on Monday.

But it retraced as the European session progressed, and at 1140 GMT the dollar index, a measure of the dollar's value versus a basket of six major currencies, was up 0.3 percent on the day at 82.721.

Earlier on Monday it dipped to 82.292, its lowest since early January, after breaking support from its 200-day moving average on Friday.

The euro fell 0.9 percent to 132.94 yen after briefly hitting a one-month high at 134.81 earlier, while the dollar was 0.7 percent lower at 97.86 yen.

The euro was down 0.5 percent at $1.3583, having earlier hit a seven-week high at $1.3670 on trading platform EBS.

The euro had climbed 1.7 percent on Friday, helped by a break through its 200-day moving average, a key technical resistance on the charts.

RISK PARED BACK

European shares were 1 percent lower, while U.S. stock futures pointed to a lower start on Wall Street.

"U.S. stock futures are off and the market has run with that a little bit," said Steven Barrow, head of G10 FX Research at Standard Bank.

"You look at the risk positions and they've been pared back a bit but a lot of the currencies have had a good run, so it's a bit of a pullback, the question is whether it's a pullback to buy in to or something more sinister."

Analysts said with several risk events out of the way such as stress tests for U.S. banks and jobs data, investors were generally more confident, although there was little in the way of near-term events to keep up that momentum.

Standard Bank's Barrow said that there currently wasn't enough momentum to see a significant break higher for the euro just now even if it did get above the $1.37/1.38 area, and that a further improvement in sentiment would be needed.

"As markets improve then the performance of investors, and hedge funds in particular, will improve and encourage them to feel redemptions could be diminishing and they can put more risk to work, getting out of dollars and investing overseas," he said.

The New Zealand dollar was down 0.1 percent on the day at $0.6026, having earlier climbed to its highest in six months above $0.6100 and the Australian dollar was down 1 percent at $0.7622 after hitting a seven-month peak in early Asian trade at $0.7714.

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