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FOREX-Dollar pressured as risk appetite improves

Published 06/30/2009, 02:28 AM
Updated 06/30/2009, 02:32 AM
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* Gains in oil, stocks help lift risk appetite

* Euro gains just 1 pct vs dlr but 7 pct vs yen in H1

* Japan exporters seen buying yen before end of month

* Sterling jumps to 8-month high vs dollar

By Rika Otsuka

TOKYO, June 30 (Reuters) - The dollar slipped on Tuesday as higher oil, gains in share prices and better-than-expected sentiment in the euro zone boosted hopes for a global recovery, sharpening investors' appetite for risk.

Currencies of commodity producers such as the Australian dollar rose as oil prices surged above $73 per barrel to hover near an eight-month high.

Foreign currency buying linked to recent launches of new Japanese mutual funds pushed down the yen across the board in early Asian trade, though it later trimmed losses as some locked in profits from a rally in other currencies the previous day.

"Optimism over the global economy is coming back," said Hideki Hayashi, a global economist at Mizuho Securities.

"More stable financial markets prompt investors to shift funds to the euro, sterling and the Aussie from the dollar."

The dollar index, which measures the dollar against a basket of six currencies, fell 0.2 percent to 79.680.

The euro gained 0.2 percent to $1.4111, extending gains made the previous day when a survey by the European Commission showed economic sentiment in the euro zone improved more than expected in June.

Short-term speculators have also been pushing up the euro/dollar, trying to test the upside after the euro found support below $1.40 on Monday and did not slide further, said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.

Still, the European single currency only gained about 1 percent overall against the greenback in the first half of this year, after losing ground sharply in the first quarter.

Sterling jumped to an eight-month high of $1.6703. Earlier, the GfK/NOP consumer confidence survey showed British consumer morale improved to its best in 14 months.

Sterling has jumped 14 percent against the dollar so far this year as investors have bought back risky assets that they dumped in panic during the height of the financial crisis.

The Australian dollar advanced 0.5 percent to $0.8118 and was also poised to end the half year up more than 14 percent.

The dollar dipped 0.4 percent to 95.70 after rising as high as 96.33 yen on trading platform EBS. It has gained less than 6 percent on the yen since the start of the year.

Japanese exporters appeared to be buying the yen as the month drew to a close, helping the yen in afternoon trade, said a senior trader at a big Japanese bank.

The euro rose near to 136 yen in early Asian trade on Japanese mutual fund buying, then eased to 135.26, almost unchanged from late U.S. trade on Monday. It has gained about 7 percent against the yen in the half year.

WAITING FOR MORE CLUES

But in a sign that investor confidence is still inconsistent, Japanese mutual funds investing in domestic and overseas assets launched on Tuesday totalled just 4.57 billion yen ($47.6 million), according to data compiled by Reuters, less than expected.

The Australian and New Zealand dollars stayed buoyant against the yen, though they pared earlier gains, as the market in uridashi bonds, or foreign bonds sold to Japanese retail investors, picked up.

A total of A$838 million in uridashi bonds was issued in June, up from A$322 million in May, while NZ$519 million in uridashi bonds were issued, jumping from NZ$72 million in May, according to Reuters data.

Tokyo's Nikkei share average rose 1.8 percent amid growing optimism that the recession may be easing.

Activity was subdued, with many investors reluctant to move ahead of important economic events such as the Bank of Japan's quarterly tankan survey on Wednesday, a European Central Bank policy meeting and the U.S. government's monthly employment report. ($1=96.06 Yen) (Additional reporting by Aiko Hayashi; Editing by Michael Watson)

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