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FOREX-Dollar stays near '09 lows as risk appetite grows

Published 06/02/2009, 08:46 PM
Updated 06/02/2009, 08:50 PM

* Jump in U.S. pending home sales boosts risk appetite

* Aussie off 8-mth high vs dlr, sterling dips from 7-mth peak

* Supranational currency comment could weigh on dlr - traders

By Aiko Hayashi

TOKYO, June 3 (Reuters) - The dollar hovered above a fresh set of lows for the year on Wednesday after U.S. pending home sales posted their third straight monthly rise, fuelling optimism about the economy and reducing safe-haven demand for the greenback.

Higher-yielding currencies such as the Australian and New Zealand dollars held within sight of eight-month highs against the U.S. dollar, benefiting from the generally bullish tone in equity and commodity markets such as oil.

U.S. pending home sales posted their biggest jump in 7-½ years in April, suggesting the U.S. housing market, which is key to an economic revival, was on the mend and reinforcing optimism about a global economic recovery.

"The dollar is likely to continue to weaken against the yen and others as questions are raised about the dollar's standing as a reserve currency," said Shinichi Hayashi, a currency trader for Shinkin Central Bank.

Comments by Russian President Dmitry Medvedev on CNBC television that the world needs a wider range of reserve currencies weighed on the dollar in New York trade.

Medvedev's statements, however, were nothing new. In May, he suggested the Russian rouble should be made the new global reserve currency. A repeat of these remarks has highlighted the dollar's vulnerability as the U.S. government tries to tackle an enormous fiscal deficit.

"Generally speaking, it's also hard to think the dollar will strengthen going forward considering the eventual fallout of GM's bankruptcy on the real economy and the mounting (U.S.) budget deficits," Hayashi said.

General Motors Corp filed for bankruptcy protection on Monday, the third-largest filing in U.S. history and the largest ever in U.S. manufacturing.

The dollar index fell to 78.334 on Tuesday, its weakest level since mid-December, and stood at 78.525 on Wednesday.

The euro was flat at $1.4303 after hitting a 2009 high of $1.4332 on electronic trading platform EBS.

The dollar fell 0.3 percent to 95.46 yen on EBS.

Higher risk currencies dipped from multimonth highs.

The Australian dollar slipped 0.3 percent to $0.8185 after jumping to an eight-month high of $0.8232, Reuters data shows.

Australian first-quarter growth data is due at 0130 GMT. Analysts expect the economy escaped a recession, at least technically, by growing 0.2 percent in the quarter, helped mainly by a jump in net exports.

Sterling edged down 0.2 percent to $1.6562. It hit a seven-month high of $1.6595 the previous day, according to Reuters data. (Editing by Chris Gallagher)

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