* Dollar slides across board, hits 2-mth low vs euro
* Dollar hits 2-mth low vs basket of currencies <.DXY>
* Focus on fate of U.S. automakers, Fed rate decision
(Adds comment, updates prices, changes byline, changes
dateline, previous LONDON)
By Wanfeng Zhou
NEW YORK, Dec 15 (Reuters) - The U.S. dollar fell to
two-month lows against the euro and a basket of currencies on
Monday, pressured by uncertainty over the fate of U.S.
automakers and reduced safe-haven flows.
The dollar was starting to respond negatively to concerns
about further weakness in the U.S. economy, analysts said,
after a run of weak data caused an exodus from risky positions
and increased flight-to-quality buying in the currency.
Investors shunned the greenback amid fears a failure of one
or more of the automakers could exacerbate a year-long
recession and drag down other companies.
"The uncertain outlook for the U.S. automakers continues to
keep investors wary of over exposure to the dollar at this
point," said Omer Esiner, senior market analyst at Ruesch
International in Washington.
"We're starting to see a shift in the market where negative
data is starting to actually impact the dollar negatively,
which is contrary to what we've seen for the better part of the
last couple of months," he added. "We're seeing a naturally
weaker dollar as we get into the year end, so bad news is only
exacerbating the need for investors to just exit their long
dollar positions."
In early New York trading, the euro was up 1.5 percent at
$1.3570 <EUR=>, after climbing as high as $1.3584, the highest
level since Oct. 15, according to Reuters data.
The ICE Futures U.S. dollar index, which tracks the value
of the greenback against a basket of six currencies, hit a low
of 82.517 <.DXY>., the weakest level since Oct. 20. It last
traded down 1.3 percent at 82.606.
A more upbeat tone in the global equities market also
helped ease extreme risk aversion, reducing the greenback's
safe-haven appeal and boosting demand for higher-yielding
currencies.
The Australian dollar rose 1.1 percent <AUD=> and the New
Zealand dollar was up 1.5 percent <NZD=>.
Against the yen, the dollar fell 0.9 percent to 90.31
<JPY=>, after hitting a more than 13-year high of 88.10 yen on
Friday. But yen gains were capped on speculation that Japanese
authorities could intervene to stem further currency strength.
BAILOUT IN FOCUS
The White House said on Friday it was considering tapping a
$700 billion financial industry bailout fund to prevent a
collapse of ailing U.S. automakers. That came after the U.S.
Senate on Thursday rejected a bailout plan to avert a possible
bankruptcy by one or more of the nation's three automakers.
But U.S. President George W. Bush said on Monday an
announcement on a car industry rescue was not imminent, leaving
the industry's fate clouded [].
Investors also awaited the outcome of a policy meeting by
the Federal Reserve on Tuesday to see how close to zero the
U.S. central bank will cut interest rates and what alternative
measures it will take to boost the economy. The Fed is widely
expected to cut rates by at least 50 basis points from the
current 1 percent.
"What the Fed says will likely overshadow its rate move,"
currency strategists at Brown Brothers Harriman, wrote in a
research note. "Many investors are looking for insight into
where the Fed anticipates ending the rate cuts and what other
non-traditional steps will the Fed adopt."
(Additional reporting by Naomi Tajitsu in London; Editing by
Chizu Nomiyama)
