* Euro boosted after higher shares improve risk appetite
* Dollar, yen slide; market cheers China stimulus package
* European shares up, U.S. stocks open higher
(Adds quotes, updates prices, changes byline, dateline,
previous LONDON)
By Wanfeng Zhou
NEW YORK, Nov 10 (Reuters) - The U.S. dollar fell against a
basket of currencies on Monday as news of a massive stimulus
package from China improved risk appetite and sparked a rally
in stock markets worldwide.
The euro showed particular strength against both the dollar
and yen, as analysts said the euro zone currency could be the
main beneficiary of China's multi-billion dollar package. The
improved risk appetite also lifted higher-yielding currencies
across the board and put pressure on the yen.
China launched an economic stimulus package on Sunday worth
nearly $600 billion in what could mark the start of a round of
big spending or interest rate cuts to stave off a recession in
many countries. See [].
"It's mainly a much healthier appetite for risk primarily
because overnight we had the big news of the Chinese stimulus
package," said Boris Schlossberg, director of currency research
at GFT Forex in New York.
Schlossberg said the news helps the euro in two ways. On
the one hand, China's huge stimulus package could possibly
create greater demand for German machinery for future
infrastructure projects.
On the other, the news is dollar negative, he said, as
Chinese officials channel their massive savings away from
dollar-denominated debt instruments toward more domestic
assets.
In early New York trading, the euro <EUR=> rose 1.4 percent
against the dollar to $1.2911.
The yen <JPY=> fell broadly, with the dollar trading up 0.7
percent at 98.95 yen, while the euro rose 1.9 percent to 127.77
yen <EURJPY=R>.
High-yielding commodity currencies rallied, aided by easing
risk aversion and sharp gains in crude-oil prices.
The Australian dollar rose 2.9 percent against the dollar
<AUD=>, and 1.9 percent against the yen <AUDJPY=R>, even as the
Reserve Bank of Australia cut its growth forecast.
European shares <> rose 3 percent, tracking strong
Asian equities. U.S. stock index futures also traded higher.
"Today, the flow in the currency market will really depend
on whether U.S. stocks will follow up on the rally in Asia and
Europe. If we have positive movements in the Dow, it should be
helpful to the euro," Schlossberg said.
RECESSION FEARS REMAIN
Despite share price rallies, currency markets remain
jittery, with ongoing worries about a global recession ensuring
that any recovery in risk appetite remains tentative.
Analysts said the initiative from China was unlikely to
provide an immediate fix to the struggling global economy, but
acknowledged that it was a step in the right direction.
"China's plan is significant and seemed to be endorsed by
the U.S. Treasury undersecretary for international affairs
David McCormick. However, it might not be as large as a cursory
look would suggest," currency strategists at Brown Brothers
Harriman wrote in a research note.
"Some of that 4 trillion yuan-figure includes spending that
had already been earmarked. In fact, early back of the envelop
calculations suggest only about a quarter or 1 trillion yuan or
a little less than $150 billion represents real new spending.
And that is over the next two years -- by the end of 2010,"
they said.
Countries around the world have been slashing interest
rates to buffer their economies against the negative impact of
the global downturn, while many nations are mulling fiscal
measures to essentially spend their way out of recession.
ECB President Jean-Claude Trichet said on Monday the
central bank won't change its inflation-focused strategy. For
details see []. On Sunday, Trichet reiterated that
the ECB does not exclude cutting rates in December. For details
see [].
Major currencies remain trapped in ranges, while the euro
continued to face downside risks despite Monday's rally amid
growing speculation of more interest rate cuts in Europe,
analysts said.
(Additional reporting by Naomi Tajitsu in London)
(Editing by Theodore d'Afflisio)
