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FOREX-Dollar retreats broadly, hits 4-month low

Published 05/12/2009, 09:02 PM
Updated 05/12/2009, 09:08 PM

* Dollar index hits 4-mth low, euro at 7-week high

* Dollar/yen down, looks vulnerable on charts

* Traders cite FT opinion piece on U.S. debt rating

* Dollar falls amid broader rise in risk appetite

By Masayuki Kitano

TOKYO, May 13 (Reuters) - The dollar slumped to a four-month low against a basket of currencies on Wednesday, facing renewed selling amid a recovery in risk appetite that has curbed safe haven buying of dollars.

Traders said the dollar also came under pressure due to an opinion story in the Financial Times that touched on the risk of the United States losing its triple A credit rating and refocused attention on rising U.S. debt issuance.

While the content of the FT article was unsurprising it helped add to pressure on the dollar, which was already looking vulnerable on technical charts, traders said.

"I think the market overall wanted to test the (dollar's) downside and the FT story linked well with that trend," said a trader for a Japanese trust bank.

The dollar index, which measures its performance against a basket of six currencies, hit a four-month low of 81.871. After trimming some losses, it was down 0.5 percent on the day at 81.933.

The dollar index had fallen below the 200-day moving average, a key support on technical charts, late last week.

The euro hit a seven-week high of $1.3722 on trading platform EBS. It later shed some gains to stand at $1.3707 for a gain of 0.4 percent on the day. The dollar fell 0.6 percent against the yen to 95.89 yen.

Market players said the dollar may be forming a head and shoulders pattern against the yen on technical charts and looked vulnerable, although it could draw some support from the 90-day moving average at around 95.45 yen. (Editing by Michael Watson)

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