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GLOBAL MARKETS-Dollar edges up, stocks hold ranges

Published 06/29/2009, 04:05 AM
Updated 06/29/2009, 04:08 AM

* MSCI world equity index down 0.19 percent at 244.41

* Dollar limps up after slide, China piles on pressure

* Oil steadies, eyes tensions in Nigeria

By Carolyn Cohn

LONDON, June 29 (Reuters) - The dollar recovered a little ground on Monday after falling late last week on a renewed call by China for a super-sovereign reserve currency, and stocks traded just below the top of recent ranges.

China, which holds nearly $2 trillion of reserves believed to be concentrated in dollars, repeated its calls for an end to the dominance of a single currency in global finance.

World stocks have shuffled sideways in the past few weeks as investors have questioned how quickly the global economy will return to growth, giving a boost to battered government bonds and pushing yields lower.

"It's quite clear that we have lost momentum over the last week or so. The strong rally that we saw in cyclicals through the early part of the second quarter has started to fade," said Darren Winder, head of macro and strategy research at Cazenove.

Many investors are also sticking to the sidelines as the second quarter winds down and ahead of U.S. and European summer holidays.

The MSCI world equity index dipped 0.18 percent, pulling away from 12-day highs hit on Friday. The index is down over 4 percent from the year's highs set earlier this month.

The FTSEurofirst 300 index edged up 0.1 percent, with firmer pharmaceutical and mining stocks outpacing weaker financial shares.

However, the Shanghai Composite Index climbed 1.2 percent to a one-year peak, getting a lift from hopes that robust bank lending will keep powering the Chinese economy through the export downturn.

DOLLAR RECOVERS

The dollar index, a gauge of its performance against six major currencies, rose 0.22 percent to 80.049, off a two-week low struck on Friday.

The euro retreated 0.17 percent to $1.4024, while the dollar was up 0.26 percent at 95.42 yen.

China and Brazil said on the sidelines of a weekend meeting of central bankers in Basel they were discussing a currency arrangement to allow exports and importers to settle deals in local currencies, thereby avoiding the dollar.

Pressure from emerging market countries to seek an alternative to the dollar as reserve currency has contributed to weakness in the U.S. currency in recent weeks.

"Even if a new supra-national currency were created, it would not be in China's or Russia's interest to reapportion their reserves in a new direction quickly," said analysts at Calyon in a client note.

"For an FX market spoiled by the excitement of big moves, the increasing drift towards range trading must risk dragging in the summer doldrums prematurely."

Crude oil steadied at $69.15 a barrel as investors looked to tensions in major exporter Nigeria.

Oil weakened earlier as the supply threat appeared to ease after four Nigeria militant factions accepted in principle an amnesty offer from the country's president.

However, Nigerian militants said on Monday they attacked a Shell platform in the Niger delta, despite the amnesty offer.

Euro zone government bonds were flat. The September Bund future was unchanged from Friday at 120.96. (Additional reporting by Atul Prakash, editing by Mike Peacock)

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