* Euro rises, dollar, yen slip on increasing risk demand
* Sterling hits 2009 high vs dollar
* Australian dollar hits 7-mth high versus U.S. dollar
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By Naomi Tajitsu
LONDON, May 19 (Reuters) - The euro rose on Tuesday, while
the dollar and the yen fell after an ongoing recovery in share
prices stoked demand for risk, while an expected improvement in
German sentiment data due later in the day also boosted the
single European currency.
European shares <> rose 1.4 percent in early trade,
taking a cue from broadly higher global stock markets as some
investors took better-than-expected earnings results from U.S.
firms on Monday as more evidence that the global economy may be
crawling out of a recession.
A monthly poll by Germany's ZEW economic think tank on
investor sentiment in the euro zone's largest economy is
expected to show a -90.0 reading for currency conditions in May,
up from -91.6 the previous month. The data is due at 0900 GMT.
Its economic sentiment index is forecast to climb to 20.0
from 13.0. Figures showing that the German economy is starting
to recover would likely prod the euro higher, as it would fit
the view that the worst of the global downturn may be over.
"The ZEW is likely to improve, so overall the market is
again playing on the possibility that we may be seeing the end
of the global recession and that is pushing risk appetite up and
weighing on the dollar," said Antje Praefcke, currency
strategist at Commerzbank in Frankfurt.
By 0810 GMT, the euro <EUR=> traded roughly half a percent
higher at a session high around $1.3623.
Also helping to boost the euro was a jump in sterling
against the dollar <GBP=D4>, which rallied to its highest level
of the year at $1.5481 following reports that the UK has held
talks with investors to gauge interest in buying stakes in
part-nationalised lenders.
Gains in the euro and sterling helped to push the dollar
down 0.4 percent against a basket of currencies <.DXY>, pulling
it away from its highest level in nearly a week touched on
Monday.
Despite its broad losses, the dollar <JPY=> rose 0.4 percent
to 96.60 yen, recovering from a two-month low of 94.55 yen hit
on Monday according to electronic trading platform EBS.
Ongoing bets that the global economy is improving has warmed
demand for riskier trades in past weeks.
This has stung both the dollar and the yen as some traders
unwind positions in the two currencies -- perceived to be
safe-haven options during times of uncertainty -- which were
taken on since autumn when the global financial market crisis
escalated.
Currencies considered to be high-risk, including the euro,
sterling and the higher-yielding Australian and New Zealand
dollars were sold off, but have since begun to recover.
On Tuesday, the Australian dollar <AUD=D4> climbed more than
1 percent to $0.7734, its highest level since early October.
In addition to continuing risk demand, the currency was
boosted after Reserve Bank of Australia Governor Glenn Stevens
said Australian interest rates were "pretty low". []
His comments affirmed expectations that the RBA is near the
end of its easing cycle, and that rates will be held steady for
now. The central bank has cut rates by 425 basis points since
September to a record low of 3 percent.
That remains significantly higher than near-zero rates in
the United States, the UK and Japan, while euro zone rates are
at a record-low 1.0 percent.
In addition to the ZEW figures on Tuesday, investors will
also look to U.S. housing starts data at 1230 GMT for evidence
to support optimism about the prospects for an economic
recovery.
"Stronger housing figures are likely to boost stocks,
further prompting investors to dump long yen positions," said
Osamu Takashima, chief currency analyst at Bank of
Tokyo-Mitsubishi UFJ.
A Reuters poll showed economists expect housing starts to
have risen to 0.52 million in April from 0.51 million in March.
Building permits are expected to have increased to 0.53 million
from 0.516 million.
(Additional reporting by the Tokyo Forex team, editing by
Andy Bruce)
