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FOREX-US dollar trades near 2009 low after US housing data

Published 08/04/2009, 11:41 AM
Updated 08/04/2009, 11:45 AM

* US dollar near 2009 vs euro after better US housing data

* Softer 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)

By Vivianne Rodrigues

NEW YORK, Aug 4 (Reuters) - The U.S. dollar remained near 2009 lows versus the euro on Tuesday after better-than-expected data on U.S. home sales added to growing optimism the recession was waning.

Good manufacturing data from China and the U.S. on Monday had pushed the U.S. dollar sharply lower as investors regained the confidence to move money into riskier investment in other markets.

But some profit taking in world stock markets on Tuesday meant the U.S. dollar slid no further, despite the better than expected data on U.S. home sales.

The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in June, rose 3.6 percent to 94.6. Analysts polled by Reuters had forecast pending home sales to rise 0.6 percent in June.

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

The euro was last little changed 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.

"Pending homes were much stronger than expected. While this isn't necessarily the best indicator for the housing market, it's just another signal of strength," said Terri Belkas, a currency strategist at DailyFX.com, in New York. "It adds to some evidence that we maybe seeing some sort of a bottom."

The dollar also erased earlier losses versus the Japanese yen after the report to trade last slightly higher on the day, up 0.1 percent at 95.36 yen.

Analysts said investors' underlying positive stance towards riskier assets remains intact. But they noted markets are likely to be cautious and currency pairs may trade in narrow ranges ahead of key events this week, including policy decisions by the European Central Bank and the Bank of England on Thursday and U.S. non-farm payrolls data on Friday.

"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."

Another report in the U.S., showing consumer spending rose slightly more than expected in June, had limited impact.

SOFTER PRICES

The dollar's recent heavy losses accompanied a jump in risk appetite as investors became increasingly confident of an improvement in the global economy.

Better-than-expected second-quarter company results, brighter manufacturing reports from the U.S., Europe and China, and stimulative policy measures have boosted hopes the global economy may have bottomed out from its worst recession in decades and triggered a rally in equities.

European shares hit a 9-month high on Monday and the S&P 500 index topped the 1,000 mark.

Still, softer oil and metals prices on Tuesday weighed on commodity-based currencies like the Australian, New Zealand and Canadian dollars, which had all hit multi-month highs in early trade, buoyed by the rally in risky assets.

The Australian dollar relinquished gains made after the Reserve Bank of Australia left interest rates unchanged as expected but dropped its easing bias, backing expectations for a rate hike by the end of the year.

The currency was last little changed at $0.8423 after rising to $0.8471 according to Reuters data, the highest since late September.

(Additional reporting by Wanfeng Zhou and Gertrude Chavez-Dreyfuss in New York)

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