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FOREX-Dollar index hits 15-month low, Aussie rises

Published 11/11/2009, 04:40 AM
Updated 11/11/2009, 04:42 AM

* Dollar index hits 15-mth low, European stocks up

* Shares boosted by strong China data, risk appetite up

* Australian dollar hits 15-mth high vs U.S. dollar

(Releads, updates throughout; previous TOKYO)

By Naomi Tajitsu

LONDON, Nov 11 (Reuters) - The dollar hit a 15-month low against a currency basket on Wednesday as the U.S. currency came under broad selling pressure versus its higher-risk counterparts on the view that the global economy may be improving.

The dollar index fell to 74.774, its weakest since August 2008, as European and Asian stock markets rallied on the back of strong Chinese manufacturing data which showed the export-driven economy was maintaining its recovery.

European shares rose 0.8 percent in early trade.

"We're looking for a rise in equities to take euro/dollar higher," said Sverre Holbek, currency analyst at Danske in Copenhagen. "The technical structure still supports euro/dollar."

The dollar also came under selling pressure after Federal Reserve Bank of Dallas President Richard Fisher said on Tuesday its depreciation had so far been orderly.

Data on Wednesday showed Chinese industrial output growth leapt to a 19-month high in October, indicating the world's third-largest economy has put the worst of the global financial crisis behind it.

Separate figures showed a dip in the pace of investment and loan growth in China, as well as weaker-than-expected exports and imports.

The rise in share markets suggested growing appetite for risk, which helped to prod the high-yielding Australian dollar to a 15-month high against the U.S. dollar, whose safe-haven appeal tends to diminish when risk demand rises. Overall, currency movements were limited as European traders were hesitant to take on big positions in light of a market holiday in the United States on Wednesday.

BOE REPORT AWAITED

By 0856 GMT, the euro had risen 0.3 percent to the day's high of $1.5044.

The dollar was flat against the yen at 89.85 yen. The yen was little moved after China said it would refer to changes in capital flows and fluctuations in major currencies when guiding the value of the yuan, marking a departure from past language on the currency, which is pegged to the dollar.

Sterling inched up 0.1 percent to $1.6752, little changed on the day, as investors awaited the Bank of England's quarterly Inflation Report due at 1030 GMT to glean a better picture of the central bank's outlook for interest rates.

The Australian dollar rose around 0.3 percent to $0.9345, its highest since August 2008.

Currencies including the Australian dollar have been rising against the U.S. currency, which has been stung by expectations the Federal Reserve will keep U.S. interest rates low while rates in Australia and elsewhere rise, increasing the returns on their assets.

Several Federal Reserve officials on Tuesday said high unemployment and sluggish consumer spending will make U.S. economic recovery erratic, keeping rates low..

"The dollar index is entering a new world, and the question is whether there will be more dollar selling from here," said Akira Hoshino, chief manager for Bank of Tokyo-Mitsubishi UFJ's foreign exchange trading department in Tokyo.

"Since U.S. monetary policy is the fundamental basis for dollar-selling, until people get the sense that they are really going to do it (raise interest rates), it will be hard to buy the dollar," Hoshino said.

(Additional reporting by Tokyo Forex Team, editing by Nigel Stephenson)

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