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FOREX-Dollar trades near 2009 low after US housing data

Published 08/04/2009, 01:16 PM
Updated 08/04/2009, 01:21 PM
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* US dollar near 2009 low vs euro after better housing data

* Softer world stocks, oil encourage some profit-taking

* Aussie edges lower from 10-month highs after RBA

* Caution ahead of ECB, BoE decisions, US jobs data (Adds comments, details, updates prices, changes byline)

By Steven C. Johnson

NEW YORK, Aug 4 (Reuters) - The dollar hovered near its 2009 low against the euro on Tuesday as a surprisingly strong U.S. housing report suggested the recession was waning.

Upbeat U.S. and Chinese manufacturing data had pushed the dollar sharply lower on Monday, giving investors confidence to buy foreign currencies and riskier investments, such as stocks and commodities.

But profit-taking in world stock markets on Tuesday slowed the dollar's slide, though a 3.6 percent rise in pending U.S. home sales kept it on the defensive.

"Good news for the U.S. economy is bad news for the U.S. dollar," said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Connecticut. "In the housing sector, I think it's safe to say that the immediate future looks brighter."

The euro was little changed from late Monday at $1.4416 after trading as low as $1.4368. It hit a nine-month high of $1.4445 on Monday, according to Reuters data.

The dollar edged up 0.2 percent to 95.39 yen JPY=> while sterling hit an eight-month high of $1.7004 before easing back to $1.6938, unchanged from late Monday.

The Australian dollar hit $0.8470, its highest level since September, after the Reserve Bank of Australia left interest rates steady but dropped its easing bias, boosting expectations of a rate hike this year. It was last up 0.2 percent at $0.8431.

Better-than-expected second-quarter corporate results, improvement in manufacturing activity in the United States, China and Europe and loose monetary policies have increased confidence that the worst of a world recession is over.

That's triggered a rally in world stock markets. The U.S. benchmark S&P 500 index topped the 1,000 mark for the first time in nine months on Monday and European shares also hit a nine-month peak.

But softer metal and oil prices on Tuesday slowed the advance of commodity-linked currencies such as the New Zealand NZD=> and Canadian dollars, which hit 10-month highs on Monday.

Analysts said investor appetite for risk remains strong but said forthcoming U.S. unemployment data and policy decisions from the European Central Bank and Bank of England have tempered some of the animal spirits a bit for now.

"Dollar sentiment, and the dollar itself, remain fragile," said Nick Bennenbroek, head of currency strategy, at Wells Fargo Bank in New York. "U.S. employment figures likely hold the key to this week's greenback performance." (Additional reporting by Vivianne Rodrigues; Editing by Kenneth Barry)

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