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FOREX-Dollar slides as hopes of recovery boost sentiment

Published 06/26/2009, 09:34 AM
Updated 06/26/2009, 09:41 AM

* Dollar falls as risk appetite improves

* China repeats call for super-sovereign currency

* U.S. consumer spending rose in May (Adds quotes, updates prices, changes byline, dateline, previous LONDON)

By Wanfeng Zhou

NEW YORK, June 26 (Reuters) - The dollar fell against major currencies on Friday as hopes that the global financial and economic crisis is moderating eroded the greenback's safe-haven appeal.

U.S. stock futures briefly gained after a government report showed U.S. personal income posted a larger-than-expected jump in May, while spending, which accounts for over 70 percent of the country's economic activity, also rose.

The data added to recent evidence around the world that the worst economic recession in decades may be bottoming out.

"This is one more 'green shoot'," said Michael Woolfolk, senior currency strategist at Bank of New York-Mellon in New York.

"We're seeing speculative money put to use at undervalued levels, and it will fuel further equity gains and put the dollar under pressure."

In early New York trading, the dollar index, a gauge of the greenback's performance against six other major currencies, fell 0.7 percent to 79.867, just shy of a two-week low of 79.562 seen this week.

The euro rose 0.6 percent to $1.4074, heading toward a two-week high of $1.4138 hit this week.

Investors began to shift back into riskier assets after the U.S. Federal Reserve said on Wednesday it would keep benchmark interest rates low for a while and left them unchanged near zero.

"A pick-up in risk appetite yesterday weighed on the dollar and we are still seeing that sentiment impact flows today," said John Rivera, currency analyst at DailyFX.com in New York.

Comments from China's central bank that it would push for the international community to reduce its over-reliance on a small number of reserve currencies also weighed on the dollar.

The dollar slipped 0.6 percent against the yen at 95.27 yen. (Additional reporting by Farah Master in London; Editing by James Dalgleish)

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