* Risk appetite rises, boosts euro, some EM currencies
* Euro gains capped by Greece concerns, spreads widen
* Aussie down as RBA surprises and holds rates at 3.75 pct
* Market awaits White House adviser Volcker's testimony
(Recasts, updates prices, adds comment, byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Feb 2 (Reuters) - The U.S. dollar weakened on
Tuesday as strong corporate earnings and improving economic
data convinced investors to wade temporarily into riskier
assets and currencies where returns are higher.
Wall Street shares advanced while commodities gained,
helping boost commodity-linked currencies such as the Canadian
dollar, Norwegian crown and Brazilian real.
Greece's fiscal woes remained a concern for the market,
capping gains in the euro. Greek government bond spreads
widened, with investors nervously awaiting the European
Commission's verdict due mid-week on the troubled country's
budget plans. [].
"The dollar is getting a pause here. But it's not
necessarily heading south or resuming a bear trend -- we're
just trying to work off an overbought situation" said Carol
Hurley, senior market strategist at Lind-Waldock, a futures
brokerage firm in Chicago.
"Overall, risk appetite is improving partly because we had
good data this morning and that's spilling over to the
commodity and stock markets."
Investors tend to sell the safe-haven dollar when the
economic outlook improves and risk appetite rises.
Pending sales of previously owned U.S. homes edged up, as
expected, in December, adding to the view that the beleaguered
sector may be nearing a bottom.
In early afternoon New York trading, the euro <EUR=> rose
0.3 percent to $1.3971, recovering from a seven-month low hit
on Monday.
Capping gains in the euro, however, were comments from the
Greek finance minister saying that the country's problems were
a euro zone issue and that other countries such as Spain and
Portugal could follow. [].
The comments came ahead of the publication on Wednesday of
EU recommendations to Athens on its austerity plan. The
Commission's much-anticipated assessment is likely to be in
line with what Greece itself has promised to do in its
long-term deficit-cutting plan. []
The ICE Futures' dollar index, a calculated measure of the
dollar's performance against six currencies, slipped 0.3
percent to 78.973 <.DXY>. The dollar was 0.3 percent lower
against the yen at 90.33 yen <JPY=>.
The Australian dollar, meanwhile, fell after the Reserve
Bank of Australia surprised investors by leaving its benchmark
interest rate unchanged at 3.75 percent. There had been almost
universal consensus the central bank would raise it to 4
percent. []
The Aussie dollar <AUD=> fell to a low of US$0.8780 before
paring losses to trade at US$0.8855, down 0.7 percent.
Some analysts said a general improvement in risk sentiment,
however slight, would limit Aussie losses in the near term, and
they expected the currency to remain in demand, particularly
given the RBA left the possibility open for future rate hikes.
"Investors may look to use the dip ... as a buying
opportunity given that broader 'risk' sentiment appears to be
improving and positioning is not stretched," Citi analysts said
in a note.
Risk sentiment will be under scrutiny later when White
House adviser Paul Volcker appears before the Senate Banking
Committee to defend the administration's proposal to limit
risk-trading by banks. The proposal spooked investors and
triggered a sell-off in equities when it was unveiled last
month.
According to testimony obtained by Reuters, Volcker will
urge Congress to curb the risks taken by large banks to help
prevent them from being treated as "too big to fail".
(Additional reporting by Nick Olivari; Editing by Dan
Grebler)
