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FOREX-Dollar falls on rising risk appetite

Published 07/15/2009, 03:04 PM
Updated 07/15/2009, 03:08 PM
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* Dollar index falls, euro touches 2-week highs

* Stocks boosted after strong Goldman, Intel earnings

* Fed raises forecasts for US unemployment rate

* New York state factory activity improves (Adds comments, details; changes byline)

By Vivianne Rodrigues

NEW YORK, July 15 (Reuters) - The U.S. dollar fell to a one-month low against major currencies on Wednesday, as better-than-expected results from Intel and Goldman Sachs boosted confidence about corporate earnings and the outlook for the economy.

Data showing factories in New York state had nearly recovered from the recession in July also lifted spirits, undermining safe-haven demand for the dollar and pushing investors into higher-yielding currencies and equities.

The dollar's losses against the euro held steady, even as the Federal Reserve released economic forecasts for 2009-11 saying the jobless rate could rise above 10 percent this year.

The Fed "bumped up the unemployment forecast, but unless we see some surprise details on asset purchases, I don't think it's going to change the market's direction today," said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut.

In afternoon trading in New York, the euro was up 1 percent at $1.4119, after touching the day's high around $1.4134, the highest since July 2. It rose 1.9 percent to 133.15 yen while the dollar added 0.8 percent to 94.32 yen.

Sterling rose 0.6 percent to $1.6420 while an index that measures the dollar against six major currencies slipped 1 percent to its lowest level since June 11.

The low-yielding yen struggled while the euro rose along with European shares and brushed off a slight annual decline in euro zone inflation.

Increased risk appetite and a rise in the price of oil also lifted the Canadian dollar to a one-month high against its U.S. counterpart.

EARNINGS OPTIMISM

Analysts said risk appetite was rising on speculation other U.S. firms may post solid second-quarter performance after reports from the two powerhouse firms exceeded forecasts.

"All lights are flashing green for investors to take on risk," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey. "Intel's earnings got things kicked off yesterday."

JPMorgan Chase & Co will announce results Thursday, followed by Bank of America Corp and Citigroup Inc on Friday.

Data from the Bank of New York-Mellon showed the euro was the most strongly net bought major currency on Wednesday, an indication of revived risk appetite.

Higher-yielding currencies also outperformed. The Australian and Canadian dollars, which tend to do well when investors' taste for risk grows, each rose more than 1 percent against the greenback.

Elsewhere, data Wednesday showed China's currency reserves surged to $2.13 trillion last month. The yuan hit a two-week closing high at 6.8316 per dollar on Wednesday, its highest close since July 2.

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