Dollar falls as strong earnings boost risk appetite
NEW YORK (Reuters) - The U.S. dollar fell to a one-month low against major currencies on Wednesday, as better-than-expected results from Intel and Goldman Sachs boosted confidence about corporate earnings and the outlook for the economy.
Data showing factories in New York state had nearly recovered from the recession in July also helped lift spirits and stocks on Wall Street.
Meanwhile, safe-haven demand for the dollar declined as investors bought higher-yielding currencies and equities.
"The combination of better-than-expected earnings and supportive data was enough to lead investors to shift money around a bit into different asset classes," said Jessica Hoversen, a fixed-income and currency analyst at MF Global Ltd. in Chicago. "With a higher degree of risk tolerance in the markets, the dollar suffered as investors looked for yield."
In late trading in New York, the euro was up 1 percent at $1.4111, after touching the day's high around $1.4134, the highest since early July. It rose 1.8 percent to 133.12 yen while the dollar added 0.8 percent to 94.35 yen.
The dollar's losses against the euro held steady, even as the Federal Reserve released economic forecasts for 2009-11 saying the jobless rate could rise above 10 percent this year.
The Fed "bumped up the unemployment forecast, but unless we see some surprise details on asset purchases, I don't think it's going to change the market's direction," said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut.
Sterling rose 0.6 percent to $1.6414 while an index that measures the dollar against six major currencies slipped 1 percent to its lowest level since June 11 .DXY.
The low-yielding yen struggled while the euro rose along with European shares .FTEU3 and brushed off a slight annual decline in euro zone inflation.
Increased risk appetite and a rise in the price of oil also lifted the Canadian dollar to a one-month high against its U.S. counterpart.
GREEN LIGHT
Analysts said risk appetite was rising on speculation other U.S. firms may post solid second-quarter performance after reports from the two powerhouse firms exceeded forecasts.
"All lights are flashing green for investors to take on risk," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey. "Intel's earnings got things kicked off yesterday."
JPMorgan Chase & Co (JPM.N) will announce results Thursday, followed by Bank of America Corp (BAC.N) and Citigroup Inc (C.N) on Friday.
Data from the Bank of New York-Mellon showed the euro was the most strongly net bought major currency on Wednesday, an indication of revived risk appetite. Continued...
