* Dollar rebounds from 4-month low versus basket
* Yen gains as riskier assets retreat after rally
* U.S. stocks fall, keeping risk appetite subdued
(Recasts, adds comments, changes byline)
By Vivianne Rodrigues
NEW YORK, May 11 (Reuters) - The U.S. dollar rose on
Monday, rebounding from a four-month low as a global decline in
stock prices boosted the greenback's safe-haven appeal and
investors bought the currency after a sharp selloff last week.
Renewed risk aversion also boosted demand for the Japanese
yen, which gained versus the euro and the dollar, as well as
against higher-yielding currencies such as the Australian
dollar. The U.S. and Japanese currencies are often perceived as
safer assets in times of market volatility.
Earlier in the global session, hopes that the worst of the
economic slump and financial crisis was over pushed the dollar
to multi-month lows, but with the outlook still far from
certain, investors were reluctant to sell the U.S. currency.
The dollar tumbled last week as stocks climbed, fueled in
part by reports suggesting the bottoming of the economic
slowdown, including a better-than-expected reading on the U.S.
labor markets on Friday.
"The market was getting a little ahead of itself last
week," said Vassili Serebriakov, currency strategist at Wells
Fargo Bank in New York.
Serebriakov added that the recent rally in equities,
commodities and commodity currencies was based more on improved
market sentiment rather than fundamental data.
"Given the ongoing difficulties in the global economy, the
recovery in the fundamentals will be much slower than the
recovery in market sentiment." he added.
In afternoon trading in New York, the ICE Futures U.S.
dollar index, a measure of the dollar's value versus a basket
of six other major currencies, was up 0.3 percent at 82.707
<.DXY>. Earlier on Monday it dipped to 82.292, its lowest
since early January, after breaking support from its 200-day
moving average on Friday.
The euro was down 0.4 percent at $1.3590 <EUR=>, having hit
a seven-week high at $1.3667, according to Reuters data. It
also fell 1.3 percent to 132.41 yen <EURJPY=> after briefly
hitting a one-month high at 134.81, according to Reuters data.
The dollar was 1.2 percent lower at 97.41 yen <JPY=> after
sliding to a session low of 97.28 yen, the lowest since the end
of April.
RISK RALLY STALLS
Worries about the financial sector resurfaced after banking
giant HSBC <HSBC.L> said first-quarter profits were "well
ahead" of last year, but would have been down without
accounting gains on its debt. For story see [].
John Rivera, currency analyst at DailyFX.com in New York,
said that now that the results of government stress tests on
major U.S. banks had been released, markets are starting to
focus again on economic fundamentals.
This week should bring a "reality check" for the euro and
help determine whether the currency's medium-term outlook is
quite as sunny as it has recently appeared, said Interactive
Brokers Group's Andrew Wilkinson.
So far, the jury is still out, as data on Monday from
France and Italy showed industrial production deteriorated in
both countries at a faster-than-expected clip. []
The news was "the exact opposite of what investors have
been getting excited about in recent weeks," he said in a
note.
Investors will get more information on whether the economy
has really turned the corner when data on U.S. retail sales and
industrial production are released this week. []
(Additional reporting by Wanfeng Zhou; Editing by James
Dalgleish)
