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FOREX-Dollar slides to 2009 low as equities, oil rally

Published 08/03/2009, 06:36 AM
Updated 08/03/2009, 06:40 AM
BARC
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* Dollar index hits 2009 low; euro/dlr at 2-month high

* Solid bank earnings lift European shares to 2009 highs

* Sterling, Aussie, Kiwi, CAD at multi-mth highs as oil jumps

* UK PMI data shows manufacturing sector expansion

By Jessica Mortimer

LONDON, Aug 3 (Reuters) - The dollar hit its lowest level in 2009 on Monday as solid banking earnings and a UK survey showing manufacturing activity unexpectedly expanding boosted the view that the global economy is over the worst.

This sent perceived higher risk currencies such as sterling and the Australian and New Zealand dollars to multi-month highs, while the euro also rose to its highest in two months against the greenback.

European shares jumped to their highest level this year as Europe's largest bank HSBC reported that profits halved from a year ago, but were still ahead of forecasts.

This followed news that Barclays reported an 8 percent rise in half-year profit, though bad debts at the bank almost doubled..

Meanwhile, news that the UK's purchasing managers' index on manufacturing moved into positive territory for the first time since March 2008 further lifted optimism on the global economic outlook.

An equivalent survey on the euro zone was also better than expected, while sentiment gained an additional boost as oil prices rising to a one-month high near $71 per barrel.

"It's hard to find any negative news out there at the moment, it's all about the risk appetite trade coming back in," CMC Markets analyst James Hughes said.

"Almost as big as the banking results today have been oil prices, which have risen above the key $70 level and helped commodity currencies," he added.

The dollar index, a gauge of the U.S. currency's performance against six other major currencies, fell to its lowest level since mid-December of 77.978.

The euro rose to a two-month high of $1.4318 on trading platform EBS, while sterling rose to its highest since late October of around $1.6880, helped by both the UK PMI data and the banking earnings.

Among commodity-linked currencies, the Australian, New Zealand and Canadian dollars all hit 10-month highs against the U.S. dollar.

The Australian dollar hit its highest since late September of $0.8410 while the New Zealand dollar hit a high of $0.6680. The Canadian dollar rose to a high of C$1.0708 per U.S. dollar. .

Market participants are awaiting the key U.S. ISM survey on manufacturing activity later in the day, while later this week central bank policy decisions are due in Australia, the UK and the euro zone.

Traders said the Aussie was being supported by expectations that the Reserve Bank of Australia may drop a key reference on monetary easing at its policy meeting on Tuesday while keeping the cash rate unchanged at 3 percent.

The euro was also helped by some better news on the euro zone economy, with revised figures showing the region's purchasing managers' index for manufacturing rose to 46.3 in July -- an upward revision from the provisional 46.0 -- from 42.6 in June.

This was the second biggest monthly rise in the series' 12-year history and helped offset news of a 1.8 percent monthly fall in German retail sales.

"I still see the market positive on risk - it would need very negative numbers out of the U.S. to dent risk appetite," said Nordea currency strategist in Copenhagen Niels Christensen.

(Reporting by Jessica Mortimer; Editing by Ron Askew)

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