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FOREX-Dollar falls broadly on data, China comments

Published 06/26/2009, 02:27 PM
Updated 06/26/2009, 02:43 PM
WFC
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* Dollar weighed down by China comments, U.S. data

* U.S. dollar falls as risk appetite rises

* US consumer spending, confidence show sign of improvement

(Adds comments, details; changes byline)

By Vivianne Rodrigues

NEW YORK, June 26 (Reuters) - The U.S. dollar fell broadly on Friday after China renewed its call for a super-sovereign reserve currency and as improving appetite for risk dented the greenback's safe-haven allure.

China's central bank on Friday did not mention the dollar by name, but said it was a serious defect in the international monetary system that one currency should dominate.

Chinese officials have repeatedly expressed concern about the dollar's reserve status in recent months, and analysts have said the sheer size of Beijing's holdings of U.S. debt means such remarks are likely to continue to put pressure on the dollar.

"The Chinese own a tremendous amount of U.S. Treasuries," said Fabian Eliasson, vice president of currency sales at Mizuho Corporate Bank in New York. "They are obviously worried about inflation and losing value on their investments."

Still, analysts said an improvement in investor appetite for risk following a series of global liquidity measures this week also weighed on the dollar, which was on track to end the week on a softer note.

"An improvement in risk appetites is also a potential reason for today's dollar decline," said Nick Bennenbroek, head of currency strategy, at Wells Fargo Bank, in New York. "While these types of comments (from China) are understandably undercutting the dollar...there is no evidence of large scale selling of U.S. Treasuries as yet."

In afternoon trading in New York, an index that measures the dollar's performance against six major currencies fell 0.8 percent to 79.755, just shy of a two-week low of 79.562 seen earlier this week.

The euro rose 0.7 percent to $1.4084, heading toward a two-week high of $1.4138 hit this week.

Against the yen, the dollar slipped 0.8 percent to 95.09 yen.

Adding to the positive market sentiment, U.S. government data on Friday showed a larger-than-expected jump in personal income in May. Consumer spending, which accounts for over 70 percent of the country's economic activity, also rose in May. ID:nN26322638

A separate survey showed U.S. consumer confidence rose in June to the highest since February 2008, as expectations grew that the worst economic recession since the Great Depression may be ending.

"A pick-up in risk appetite yesterday weighed on the dollar and we are still seeing that sentiment impact flows today," said John Rivera, currency analyst at DailyFX.com in New York.

Elsewhere, however, traders remained cautious about more currency intervention by the Swiss National Bank to weaken its domestic currency against the euro and the dollar to protect the export-driven economy.

Data on Friday showed Switzerland's leading growth indicator, the KOF Swiss Economic Institute's economic barometer, rose to minus 1.65 points in June -- its first rise in two years -- beating forecasts of minus 1.76.

The euro was last down 0.4 percent against the Swiss franc at 1.5257 francs. Broad dollar weakness dragged the U.S. unit down to 1.0815 francs, down 1.1 percent on the day.

(Additional reporting by Wanfeng Zhou in New York;) (Editing by Theodore d'Afflisio)

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