FOREX-Dollar hits record low vs franc, recovers vs euro

* Dollar hits 6-1/2-week low vs yen

* Yen boosted by rise in Japanese factory output

* Euro erases gains vs dollar after weak U.S. data

* Worries about euro zone, U.S. growth still linger
(Updates prices, adds detail on data, comment)

By Wanfeng Zhou and Steven C. Johnson

NEW YORK, Dec 28 (BestGrowthStock) – The dollar hit a record low
against the Swiss franc and tumbled against the yen on Tuesday
after Japan reported its factory output rose in November for
the first time in six months.

A surprise decline in U.S. consumer confidence this month,
however, helped the greenback recover losses against the euro,
which had climbed as high as $1.3274 overnight before falling
back to $1.3130 (EUR=: ), down 0.2 percent.

Much of the day’s price action was tied to year-end
position squaring, traders said.

That was the case with the Swiss franc, the biggest gainer
among major currencies, with traders citing buying by Swiss
corporates. Moves were exaggerated in very thin post-Christmas
trade, with UK markets closed for a public holiday.

Recent yen gains have also been tied partly to year-end
repatriation flows from Japanese exporters. The dollar’s fall
to a 6-1/2-week low of 81.81 yen (JPY=EBS: ) also reflected a 1
percent jump in Japanese industrial output in November reported
on Tuesday. The dollar was last at 82.10 yen, down 0.8
percent.

The dollar’s move below the 55-day moving average of 82.59
yen, which had served as key support, accelerated the decline.

The euro hit a 3-1/2-month low of 107.82 yen (EURJPY=: ).

“The industrial production numbers out of Japan were
extremely strong, and that certainly has provided a bid to the
yen across the board,” said Dean Popplewell, chief strategist
of FX brokerage OANDA in Toronto.

For more on the Japanese data, see [ID:nLDE6BR01R]

Against the Swiss currency, the dollar fell to 0.9435
francs (CHF=EBS: ), an all-time low, before clawing its way back
to 0.9509 francs, still down 0.9 percent.

DOUBTS REMAIN FOR 2011

The dollar traded sharply lower against commodity-linked
currencies, with the Australian and New Zealand dollars rising
nearly 1 percent on the day.

“Dollar weakness is basically on the back of commodities,”
Popplewell said. “Both oil and gold are seeing robust demand.
The market seems to have shrugged off the interest-rate hike in
China over the weekend.”

But some analysts said investors were still wary of taking
on too much risk for fear Europe’s debt crisis could worsen or
the U.S. economy could grow more slowly than expected in 2011.

Reports showing U.S. home prices fell for a fourth straight
month in October and U.S. consumer confidence faded in December
added to the cautious sentiment and contributed to the euro’s
retreat, said GFT Forex strategist Kathy Lien.

The U.S. dollar often gains when investors grow averse to
risk because they see at as a safer option in difficult times.

“As much as investors want to deny it, there are still
lingering concerns about the impact of Europe’s debt crisis,
about a sluggish U.S. recovery and about Chinese rate hikes,”
Lien said. “Those lingering concerns are affecting the
market.”

The consumer data in particular, she added, shows Americans
“are still worried about high unemployment, housing market
stagnation and the generally meager growth they’ve seen.”

The euro hit a December low last week at $1.3055, and an
earlier rise Tuesday ended just shy of $1.3278, the 50 percent
retracement of a monthly decline that started at $1.3500.

The move raised doubts about whether the euro would be able
to target $1.3330-35, which includes a 61.8 percent retracement
of the same December decline, before year end.

Many in the market expect to see more euro weakness in the
new year, amid persistent worries over debt problems for Spain
and Portugal. But euro bears had been frustrated by the
currency’s firm support for more than a week at its 200-day
moving average just below $1.31.

While much of the Swiss franc’s rise has been tied to
year-end flows, some investors say it also benefits as a
safe-haven alternative to the euro.

The latest positioning data showed speculators increased
bets against the euro in the week ending Dec. 21, while they
trimmed bets against the U.S. dollar and boosted long positions
in the Swiss franc. [IMM/FX]
(Additional reporting by Jessica Mortimer in London; Editing
by Leslie Adler)

FOREX-Dollar hits record low vs franc, recovers vs euro