Dollar turns lower as risk appetite picks up

By Anirban Nag

SYDNEY (BestGrowthStock) – The U.S. dollar slipped further from six-month highs against a basket of currencies on Wednesday, as investors picked up bargains in beaten down growth-linked currencies with risk appetite showing some signs of recovering.

Sentiment toward riskier assets like stocks and commodities was helped by strong U.S. corporate earnings and improved economic data from the housing sector. (.N: ).

Still, investors remained cautious ahead of the European Central Bank meeting on Thursday and the U.S. non-farm payrolls report on Friday.

Anecdotal evidence of the U.S. labor market will be published later on Wednesday when the Challenger jobs cuts and the ADP employment report for January will be released.

The dollar index (Read more about the global trade. ) (.DXY: ) was down below the 79 mark, retreating from a six-month high of 79.547 struck on January 31. It had rallied in the past two weeks as investors cut positions in growth-linked currencies on worries China was moving to tighten credit and concerns about the pace of global growth.

But those concerns seemed to have eased just for the moment allowing commodity-linked currencies such as the Canadian dollar, Norwegian crown, the Australian and New Zealand dollar to make gains.

The euro held on to gains made overnight, climbing to $1.3969 in early Asian trade. It faces a stiff fight uphill as credit worries related to Greece fester in the background.

Greek government bond spreads widened on Tuesday, with investors nervously awaiting the European Commission’s verdict due mid-week on the troubled country’s budget plans.

Still, since short positions in the euro are at a high, it is unlikely the single currency can fall much, traders said. There is also talk of stops lurking above $1.4000.

“The current rally has the makings of bottom-picking rather than bullish conviction,” said Matthew Strauss, senior currency strategist at RBC Capital.

“With a few more central bank meetings this week and U.S. employment data on Friday, this tentative rally could change to something more sustainable. Keep those fingers crossed.”

The dollar was steady on the yen at 90.40 yen late on Tuesday, when it lost around 0.3 percent. Traders said options-related selling around 90.80 yen was likely and that could cap any gains by the dollar on the yen.

Meanwhile, the Australian dollar bounced from Tuesday’s sell-off, which came after the Reserve Bank of Australia surprised investors by leaving its benchmark interest rate unchanged at 3.75 percent.

It rose to around $0.8865 from a low of $0.8780 struck on Tuesday, with an improvement in risk appetite also helping the currency.

Stock Report

(Editing by Wayne Cole)

Dollar turns lower as risk appetite picks up