* Dollar falls broadly, euro/dollar hits 6-week high
* Share prices up 1.4 pct, boosting risk demand
* CIT Group strikes last-minute rescue deal
(Adds comment, details, updates prices)
By Nick Vinocur
LONDON, July 20 (Reuters) - The dollar fell broadly on Monday, hitting a six-week low against the euro, as traders flocked to riskier assets as a rescue for U.S. lender CIT and hope for more solid corporate earnings boosted share prices.
A further pick-up in risk appetite pushed the euro to around $1.4248 according to Reuters data, its strongest since early June, and lifted European stocks by 1.4 percent. This helped to push the dollar to a six-week trough versus a currency basket.
The last-minute financing deal for CIT Group late on Sunday was also helping risk sentiment as it eased concerns the lender would have to seek bankruptcy protection. [ID:nLK693118]
Assets considered to be higher risk extended gains after rallying last week when investors took mixed U.S. corporate earnings as an optimistic sign that the economy is improving.
"A big relief was this CIT news -- that's what's been driving the (equity) market higher and, as a result, driving euro and sterling higher," said Audrey Childe-Freeman, strategist at Brown Brothers Harriman in London.
Volumes were light with Tokyo shut for a local holiday.
At 1114 GMT, the euro
The dollar index <.DXY> was down 0.6 percent at 78.867, after falling as low as 78.799, its lowest since early June.
The U.S. currency struggled broadly, pushing sterling and the Australian and New Zealand currencies each up as much as 1.5 percent. The New Zealand dollar rose near its 1-year high.
Despite broad weakness, the dollar rose 0.3 percent to 94.47 yen as risk demand also stung the Japanese currency. This helped to push the UK and antipodean currencies up around 1.5 percent against the yen.
MORE EURO GAINS?
The euro's climb on Monday lifted it above the 50 percent Fibonacci retracement level of the pair's peak-to-trough move in 2008, which was located around $1.4190.
Some technical analysts said this opened the way for further gains in the pair, while others were less optimistic, pointing out that previous efforts to do so have proved unsuccessful.
"The market is going to be bid over the next day or two but I don't see dollar weakness lasting past the end of the week," said Tom Pelc, head of technical strategy at RBS in London.
"I don't think the market can get above $1.46 on any kind of continued upward move," he added, referring to the next key Fibonacci level, the 61.8 percent retracement.
Growing expectations of an improvement in the U.S. economy have sent investors searching for higher yields.
Last week, Goldman Sachs Group and JPMorgan Chase reported better-than-expected results for the second quarter, while Bank of America posted a lower quarterly profit.
U.S. financials reporting this week include American Express, State Street and Bank of New York Mellon. Some analysts said disappointing earnings from those firms may trigger risk aversion and prompt selling in high-risk assets.
Federal Reserve Chairman Ben Bernanke will start his semi-annual testimony to the U.S. government on Tuesday.
Many in the market said the focus would be on any reference to a possible exit strategy from quantitative easing, while some analysts pointed out that a less-than-optimistic view of the economy may cut risk demand.
"If sterling and the euro are looking increasingly overbought, more cautious remarks from the Fed may give people the opportunity to take profits (from recent gains), and we could see a correction," said BBH's Childe-Freeman. (Additional reporting by Naomi Tajitsu, editing by Toby Chopra)