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FOREX-US dollar slips as risk appetite improves; euro higher

2010-02-08 19:50:36 GMT (Reuters)
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* Euro recoups some losses but remains fragile

* G7 on Greece inadequate, more needed-analysts

* Other higher-yielding currencies rise (Recasts, updates prices, adds quotes, changes byline)

By Gertrude Chavez-Dreyfuss

NEW YORK, Feb 8 (Reuters) - The U.S. dollar drifted lower on Monday as a modest recovery in overseas stock markets and commodities enhanced risk appetite and prompted investors to venture into other higher-yielding currencies.

The euro, though, stayed near 8-1/2 month lows versus the dollar, with investors still worried about the fiscal health of some euro zone countries, including Greece, Portugal and Spain.

"The initial rebound in equities around the world pushed the euro higher, but it's been running into offers between $1.3710 and $1.3720," said John McCarthy, director of foreign exchange at ING Capital Markets in New York.

"There are still grave concerns about the sovereign debt situation in Europe. So just the general economic tone is negative for equities, negative for risk, but positive for the dollar.

In early afternoon trading, the euro was up 0.1 percent on the day at $1.3681, not far from $1.3583 reached on the Reuters platform on Friday, its lowest since May. The single currency had earlier hit a session peak of $1.3714.

The euro has shed nearly 10 percent from a 15-month high of $1.5145 reached in late November over growing fears Portugal and Spain could face the same fiscal problems as Greece.

Concerns persisted despite this weekend's reassurance from European officials of the Group of Seven rich nations that they would ensure Greece sticks to its budget-cutting plan. Analysts said more was needed to reassure markets euro zone debt problems would not upset a global economic recovery.

A Greek public sector union warned of further strikes to fight austerity measures, prompting an increase in the cost of insuring Greece's sovereign debt. Greek government bond yield spreads over German benchmarks also rose.

U.S. Commodity Futures Trading Commission data showed investors increased bets on further dollar gains in the latest week. Net long positions in the dollar were at their highest in about 11 months. The net short euro position, meanwhile, rose to a record high, according to Barclays Capital and Scotia Capital data.

Against a basket of currencies, the U.S. dollar was down 0.2 percent at 80.283. However, it was not far from a high of 80.683 hit on Friday, its strongest since July 2009. Technical traders said the greenback had broken its 200-week moving average to trade above it for the first time since May 2009.

The dollar was flat against the yen at 89.32 while the euro rose 0.1 percent to 122.22 yen.

Among higher-yielding currencies, the Brazilian real rose against the dollar, which fell 0.5 percent to 1.8720, while the Norwegian crown, taking its cue from higher oil prices, gained, with the dollar falling 0.5 percent versus the crown to 5.9570.

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