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FOREX-Dollar up but stays close to 15-month low

Published 11/10/2009, 09:13 AM
Updated 11/10/2009, 09:18 AM

* Dollar index up but remains near 15-mth low;

* Weak dollar trend to persist, analysts says

* Pound falls after Fitch warns on UK rating

* Euro struggles to hold above $1.50 (Recasts, updates prices, adds details, changes dateline from previous LONDON)

NEW YORK, Nov 10 (Reuters) - The dollar rose broadly on Tuesday from a 15-month low touched in the prior session as investors saw Monday's fall as too far, too fast.

Analysts said investors lacked any catalyst to take the dollar much lower after its recent sharp falls, but added that the trend towards dollar weakness remained in place.

Sterling was one of the big movers on the day. falling after Fitch said the UK was the major economy most at risk of losing its AAA rating.

"There is a slight pullback in risk appetite overnight," said John Doyle, foreign exchange strategist at Tempus Consulting in Washington. "Yesterday, we might have moved a little too far, too quickly."

In early New York trade, the dollar index, the dollar's performance against six major currencies, was up 0.2 percent at 75.145. On Monday, it fell about 1 percent to a low of 74.93, its weakest since August 2008 and the biggest one-day drop since late July.

The euro edged down 0.2 percent to $1.4970, though still close to its 2009 high above $1.5060.

"The single currency is struggling to hold on to the $1.50 handle, and with the softer tone in the equity and commodity markets, the euro is likely to give up ground in New York trading," Brown Brothers Harriman analysts said in a note.

A weaker-than-expected German ZEW economic sentiment index showed that investors were more gloomy than at any time in the last four months.

Expectations that U.S. interest rates will stay near zero well into next year have encouraged investors to use the dollar to fund carry trades in higher-yielding assets, particularly when equity markets rally.

The Australian dollar, a relatively high yielder, was down 0.2 percent at $0.9277. It had climbed well above the $0.93 level after strong Australian business confidence data, though it stopped just shy of a 15-month high.

STERLING SLIPS

Sterling fell after Fitch Ratings said that of the four major economies with top-notch AAA status, the UK was the most at risk, sending the pound down sharply to shed as much as a cent and a half on the day against the dollar.

David Riley, co-head of global sovereign ratings at Fitch, said if there was another significant fiscal stimulus package in highly indebted Britain its rating would be at risk.

"The Fitch news was a reminder of the longer-term issues facing the UK," said Lutz Karpowitz, currency strategist at Commerzbank in Frankfurt.

The pound slipped down to the $1.66 level, well below a three-month high reached on Monday, and fell to beyond 90.00 pence per euro.

Early in the New York session, it had pared some of those losses, but was still down 0.3 percent against the dollar at $1.6788, while the euro was up 0.2 percent at 89.62 pence.

A host of officials from the Federal Reserve were scheduled to speak on Tuesday, and the market will watch what they say regarding the outlook for interest rates and the eventual withdrawal of easy monetary policy measures.

Elsewhere, the yen pared earlier losses against the euro, though it remained 0.4 percent lower at 134.39. The dollar edged down 0.3 percent to 89.79 yen.

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