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FOREX-Dollar falls to six-week low on earnings, data

Published 07/16/2009, 09:30 AM
Updated 07/16/2009, 09:32 AM
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* Dollar index hits lowest since early June on JPM results

* Euro, pound hit day's high on strong JPM performance

* Kiwi falls after Fitch cuts NZ outlook to negative (Updates prices, adds quote, U.S. data; changes byline, dateline, previous LONDON)

By Steven C. Johnson

NEW YORK, July 16 (Reuters) - The dollar fell to a six-week low against a basket of major currencies on Thursday after strong results from JPMorgan boosted hopes for a U.S. recovery, diminishing the greenback's safe-haven appeal.

JPMorgan Chase said strength in its core consumer and investment banking business boosted earnings per share, surpassing expectations and prompting investors to sell the dollar for higher-yielding currencies and assets.

The euro and sterling rose, erasing losses against the dollar, while an index that measures the greenback against six other major currencies hit its lowest since June 4.

Data showing the number of Americans filing new claims for jobless benefits fell last week to the lowest since January also boosted sentiment, lifting U.S. stock futures.

"Positive earnings and optimism in equity markets are really what's been weighing on the dollar this week," said Vassili Serebriakov, a strategist at Wells Fargo in New York. "The data, at least in the near term, is likely to add to the optimistic mood in equity markets and hurt the dollar."

The euro rose 0.3 percent to $1.4139, near a $1.4165 session peak, according to Reuters data, and off the day's low of $1.4056. Sterling rose as high as $1.6462 before easing to $1.6449, up 0.1 percent.

Some market participants said euro-dollar trade may be choppy ahead of options expiries later in the day. IFR reported that 200 million euros' worth of options with a $1.41 strike price were due to expire.

The yen, which usually also weakens when risk appetite rises, held gains on Thursday. Though above session lows, the dollar was down 0.6 percent at 93.70 yen while the euro and sterling also slipped against the Japanese currency.

Some analysts said that may signal that risk-seeking behavior may not last long.

"The financials beat the numbers with very clear help from the government, but when you look at the real economy companies, you're seeing a difficult road for them," said Boris Schlossberg, head of FX research at GFT Forex in New York.

"So I think this big burst of enthusiasm could fade as the day goes by and risk currencies could come off their highs. I still think the problems in the real economy still persist."

The New Zealand dollar fell after ratings agency Fitch downgraded New Zealand's sovereign outlook to negative, citing a high current account deficit.

The Kiwi fell 0.6 percent to $0.6449.

CHINA GROWS, MARKET CAUTION LINGERS

Speaking after a meeting with his French counterpart, U.S. Treasury Secretary Timothy Geithner cited a "very encouraging" improvement in financial system stability.

Encouragement also came from China, where data showed the country's economy grew 7.9 percent in the second quarter from a year earlier. That beat expectations and boosted hopes the biggest emerging economy will lead the way out of the worst global downturn since the 1930s.

JPMorgan's strong performance comes on the heels of stellar earnings from Goldman Sachs earlier in the week. Citigroup, General Electric and Bank of America are expected to announce results on Friday.

Elsewhere, data showed the United States saw overall net capital outflows of $66.6 billion in May. The dollar fell more than 6 percent that month against major currencies, largely due to rising optimism about a global recovery.

In Paris on Thursday, though, Geithner reiterated his support for a strong dollar and said it would remain the world's reserve currency. (Additional reporting by Wanfeng Zhou and Gertrude Chavez-Dreyfuss in New York and Naomi Tajitsu in London; Editing by James Dalgleish)

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