* Dollar firms versus yen, Swiss franc as equities rise
* Dollar falls against high yielders on carry trades
* U.S. data, including Tuesday's retail sales, awaited
(Recasts, adds comments, changes byline)
By Vivianne Rodrigues
NEW YORK, May 12 (Reuters) - The dollar rose against the
Japanese yen and Swiss franc on Monday as investors snapped up
riskier assets such as stocks, encouraged by a dip in oil
prices and unexpectedly strong earnings from HSBC.
The slight rise in investors' appetite for risk revived
interest in carry trades, helping to lift the high-yielding
euro, sterling and Australian and New Zealand dollars against
the U.S. currency.
In carry trades, investors borrow against the yen or other
low-yielding currency to buy assets offering higher returns.
Some analysts now regard the dollar as a funding currency after
the Federal Reserve slashed its key overnight lending rate by
3.25 percentage points to 2 percent since mid-September.
"With equities moving higher, we are having a little flow
back into carry trades, which is helping euro/yen and propping
the euro up against the dollar, in addition to sterling and the
other high yielders," said Mark Meadows, senior currency
strategist at Tempus Consulting in Washington.
By late afternoon, the dollar was trading at 103.90 yen
<JPY=>, up 1 percent on the day. Against the Swiss franc
<CHF=>, the dollar was up 0.4 percent at 1.0445 francs.
The euro vaulted 1.4 percent to an intraday peak of 161.42
yen <EURJPY=>, helping the euro zone currency to erase losses
against the dollar. The euro last traded up 0.4 percent at
$1.5534 <EUR=>.
There is a strong correlation between the euro/yen and
stocks, and gains in the currency pair tend to feed through to
euro/dollar.
Traders also attributed the euro's advance against the
dollar to stop-losses above the $1.55 area amid thin liquidity,
with most European markets closed.
"There are stop-losses above 1.55 on euro/dollar, which
could be driving us up here. Euro/yen strength is also
strengthening the euro (against the dollar)," said Firas
Askari, head currency trader at BMO Capital Markets in
Toronto.
BIG DATA SLATE
United States and global stocks were cheered by news that
European banking heavyweight HSBC <HSBA.L> posted unexpectedly
strong first-quarter earnings and a fall in oil prices <CLc1>.
Investors will watch a big slate of economic data on
Tuesday, especially April U.S. retail sales, as well as
speeches by Fed officials for clues on whether the U.S. central
bank will cut benchmark interest rates again next month.
"This week will provide fundamental evidence as to where
the U.S. dollar should move from here as the market will
receive a multitude of important updates including retail
sales, CPI, Philly Fed, housing starts and Michigan
confidence," Camilla Sutton, a currency strategist at Scotia
Capital in Toronto, said in a note.
Chicago Fed President Charles Evans said the consumer was
"under a lot of stress" and the economy faced downside risks.
Short-term interest rate futures <FFG8>, which track market
expectations for Fed monetary policy, show an 86 percent
perceived chance that the Fed will keep benchmark lending rates
unchanged at 2 percent when it next meets on June 25.
At the same time, mounting signs that European growth is
stumbling has stirred speculation the European Central Bank
could edge towards trimming rates for the first time in nearly
a year. This could boost the dollar, whose appeal has been
undermined by the Fed's aggressive rate cuts.
"The outlook has become clouded over recent weeks as euro
zone growth has shown clear evidence that it is decelerating,
while inflationary pressures are ongoing," Sutton at Scotia
Capital added.
News that a major earthquake had shaken parts of China had
limited impact on the currency market as the disturbance
happened in regions not relevant for the country's external
trade. For more click on [].
Still, market analysts at Merrill Lynch & Co said in a note
that if casualties turned out to be big, business in Beijing
may "temporarily stall."
(Additional reporting by Lucia Mutikani; Editing by James
Dalgleish)
