* Dollar falls broadly as equities rise on renewed optimism
* Strong German ZEW survey boosts euro; higher risk FX gain
* Sterling hits 2009 high vs dollar above $1.55
* Australian dollar hits 7-mth high versus U.S. dollar
(Adds comment, quotes, changes byline)
By Jessica Mortimer
LONDON, May 19 (Reuters) - The dollar fell broadly on
Tuesday, dented by rising stocks and renewed optimism about the
global economy which diminished demand for safer assets and
bolstered perceived higher risk currencies.
The euro extended gains versus the dollar after a
surprisingly strong German sentiment survey, while the pick-up
in risk appetite helped sterling and the Australian dollar to 5-
and 7-month highs against the U.S. currency respectively.
German economic think tank ZEW said economic sentiment
jumped to 31.1 from 13.0 in April [], offsetting
the negative impact of last week's poor euro zone gross domestic
product data and encouraging the view that the worst is over.
Investor optimism was reflected in share prices, with
European equities up 1.5 percent <>, while U.S. stock
futures <SPc1><DJc1> pointed to a firm start on Wall Street.
"There is a trend of increasing risk appetite and it's a
robust trend which is liquidity-driven, with equity markets
rebounding as the market focuses on the positives and brushes
aside the negatives," BNP Paribas currency strategist Ian
Stannard said.
"Everything is working in favour of cyclical and commodity
currencies, while the dollar is coming under pressure," he said.
By 1153 GMT, the euro <EUR=> traded up 0.5 percent against
the dollar at $1.3620.
Technical analysts now expect the euro to test last week's
high of around $1.3721, a breach of which could pave the way for
a move towards $1.40.
Sterling <GBP=D4> jumped against the dollar, rallying above
$1.55 to its highest level of the year at $1.5514, while oil
prices at a six-month high bolstered commodity currencies, with
the Aussie dollar hitting a 7-month high of $0.7770 <AUD=D4>.
The New Zealand dollar <NZD=> jumped by 1.6 percent against
its U.S. counterpart, which also lost 0.5 percent against the
Canadian dollar <CAD=>.
Broad losses caused the trade-weighted dollar index to fall
0.4 percent to 82.175 <.DXY>, while increased appetite for risk
also weighed on the yen, with the euro up 0.3 percent at 130.84
yen <EURJPY=R> while the dollar was steady at 96.17 yen <JPY=>.
Ongoing bets that the global economy has turned a corner has
stung the dollar and the yen as traders unwind positions in the
two currencies which had been built up since last autumn when
the financial crisis escalated. They are perceived to be
safe-haven options during times of uncertainty.
STERLING SHINES
Sterling was helped higher by reports that the UK has held
talks with investors to gauge interest in buying stakes in
part-nationalised lenders. [].
The UK currency dipped back below $1.55, however, after a
government source told Reuters that it was too early to talk
about the government selling its stakes [], though
traders said the impact on the pound was small.
The Australian dollar meanwhile gained additional support
after Reserve Bank of Australia Governor Glenn Stevens said the
country's interest rates were "pretty low". []
Some analysts warned, however, that the rally in riskier
assets could be vulnerable to a correction in the event of any
bad news on the data front.
"The market may have gotten ahead of itself in some sense,
because the hard data isn't looking great at the moment,
although the financial risk environment is looking better and
that's what the euro has been is reacting to," said Phyllis
Papadavid, currency strategist at SG in London.
She warned that the euro and other currencies perceived to
be high-risk could come under selling pressure if hard economic
data does not support the global economic recovery story.
Investors awaited U.S. housing starts data at 1230 GMT for
evidence to support optimism about the prospects for an economic
recovery, which analysts said may further improve risk demand.
(Additional reporting by Naomi Tajitsu; editing by Stephen
Nisbet)
