(Recasts, updates prices, changes byline)
By Lucia Mutikani
NEW YORK, March 25 (Reuters) - The dollar fell broadly on
Tuesday, posting its steepest loss against the euro in two
weeks, sparking a rebound in commodity prices and helping to
preserve investors' appetite for risk.
News that U.S. consumer confidence in March plunged to a
five-year low, while expectations for the future dropped to
their lowest level in 34 years also added to selling pressure
on the dollar. A separate report showed U.S. home prices for
January declined in 16 of the 20 regions measured.
However, caution ahead of Germany's Ifo business sentiment
survey for March due on Wednesday curbed the euro's rise
against the dollar, analysts said.
"Even though the numbers were so bad, what we are seeing is
part of the equity/dollar risk appetite play all of which is
suggesting a comfort to take on risk at the expense of the
U.S.dollar," said Ashraf Laidi, chief FX strategist at CMC
Markets in New York.
The euro climbed to a session peak $1.5618 <EUR=>. In late
New York trade, it was up 1.2 percent on the day at $1.5609,
posting its biggest one-day rise since March 12, according to
Reuters data.
The single currency is down about 1.9 percent from last
week's record high at $1.5904, but still up almost 7.0 percent
since the beginning of the year.
"The euro's gains against the dollar were limited
considering the extent of the poor showing in consumer
sentiment and that could partially reflect cautiousness ahead
of the Ifo survey tomorrow," said Laidi.
"After a string of monthly increases the Ifo may finally
show a retreat that would risk sending the euro back in selling
mode as was the case last week. The Ifo has been instrumental
in key turn arounds in the euro."
A Reuters survey forecast the Ifo business climate index
slipping to 103.4 from 104.1 in February.
U.S. ECONOMIC WORRIES LIFT YEN
Concerns about the health of the U.S. economy and the
global financial sector, which were heightened by the downbeat
consumer confidence and housing report, pushed the dollar
weaker versus the low yielding Japanese yen and Swiss franc.
Low yielding currencies such as the yen and Swiss franc
tend to attract flows during periods of uncertainty as the low
interest rates reflect the capital surplus of their respective
countries.
The interbank cost of borrowing three-month dollar,
sterling and euro funds rose on Tuesday, suggesting financial
institutions were still hoarding cash despite efforts by
central banks to inject liquidity into the money market.
"While the Fed is doing their job ensuring there is plenty
of liquidity in the system...there is still a big question mark
about the extent of the slow down in the U.S. economy," said
Paresh Upadhyaya, portfolio manager at Putnam Investment
Management in Boston.
Against the yen, the dollar slid to an intraday trough of
99.640 yen <JPY=> and erased earlier gains above 101 yen. It
was last trading at 100.20 yen, down 0.5 percent. Against the
Swiss franc, the dollar fell 1.00 percent to 1.0079 francs
<CHF=>.
The weak dollar saw gold and oil prices rebound from last
week's declines, supporting U.S. equities and lifting
commodity-based currencies such as Australian and New Zealand
dollars.
"Risk aversion has subsided from last week and people are
more willing to get back into the things that have worked so
well for so long. You are seeing the old trends reset
themselves," said Adam Fazio, senior currency strategist at
CIBC World Markets in New York.
(Additional reporting by Gertrude Chavez-Dreyfuss; Editing
by Diane Craft)
