FOREX-Dollar edges higher as euro zone data disappoints

                                
 * Euro hits lowest against the dollar since January
                                
 * Dollar continues to benefit from global economic jitters
                                
 * U.S. factory orders rise more than expected in July
 (Adds comments, updates prices, changes byline)
                                
 By Vivianne Rodrigues
                                
 NEW YORK, Sept 3 (Reuters) - The U.S. dollar rose slightly
on Wednesday and earlier touched its highest against the euro
since January, on growing expectations the U.S. economy  would
outperform that of Europe.
                                
 The dollar briefly extended its gains versus the euro after
a government report showed U.S. factory orders rose more than
expected in July, adding to signs of resilience in the U.S.
economy. For more see [ID:nN02444541].
                                
 The data "fills in the picture of a moderately recovering
U.S. economy," said Joseph Trevisani, chief market analyst at
FX Solutions in Saddle River, New Jersey, referring to U.S.
factory orders data. "All in all, it will provide the dollar
with longer-term support."
                                
 In contrast, euro zone data on Wednesday underscored a
weakening economy in the region. Retail sales in July fell and
other reports confirmed the euro zone economy shrank in the
second quarter, its first quarter-on-quarter decline since the
data series began in 1995. [ID:nL2117725].
                                
 In late afternoon trading in New York, the euro <EUR=> was
0.1 percent down at $1.4505, after hitting a low of $1.4386 in
intraday trading, its lowest since Jan. 22.
                                
 The ICE Futures U.S. dollar index <.DXY>, which tracks its
performance against a basket of six major currencies, jumped
earlier to an 11-month high of 78.651, before pulling back to
trade little changed at 78.019.
                                
 Sterling <GBP=> fell as low as $1.7669, crashing more than
a full cent to its lowest since April 2006, before recovering
slightly after data showing an improvement in the UK services
sector. The pound last traded down 0.3 percent at $1.7773.
                                
 A further drop in oil prices, which tumbled this week after
Hurricane Gustav left energy facilities in the Gulf of Mexico
mostly unscathed, also benefited the U.S. currency. Oil last
traded down 0.3 percent at $109.41 a barrel <CLc1>.
                                
 "The dollar once again reaffirmed its status as the current
king of the hill in the forex markets, buoyed by continued
declines in oil and gold prices," Boris Schlossberg, a currency
strategist at GFT Forex, said in a note.
                                
 Analysts said investors were increasingly getting on board
with the greenback as a safer place to allocate cash compared
with currencies whose countries were further behind in terms of
economic readjustment in the wake of the global credit crunch.
                                
 "It's clearly a strong dollar story that continues this
week," said Vassili Serebriakov, a currency strategist at Wells
Fargo in New York. "We're still continuing to see liquidation
of many remaining U.S. dollar shorts."
                                
 A Federal Reserve report on regional economic conditions
had limited impact on the markets. The Fed's anecdotal Beige
Book showed economic activity has been slow across the United
States in recent weeks, but there has been some relief from
high commodity and energy prices. [ID:nN03277374].
                                
 CENTRAL BANK DECISIONS ON TAP
                                
 The European Central Bank and the Bank of England will
issue separate interest-rate decisions on Thursday and both are
expected to keep rates on hold. [ID:nL1358323] [ID:nL2593052].
                                
 The ECB has long said its main concern is taming
inflationary pressures and that it will tighten policy if price
risks remain high. But analysts say an increasingly bearish
growth view may spur speculation of a possible rate.
                                
 "The ECB's increased acknowledgment of the widely
anticipated technical recession in the euro zone is prompting
bond markets to expect easing in 2009, the same year in which
the Fed is widely expected ... to begin raising interest
rates," said Ashraf Laidi, chief FX strategist at CMC Markets
U.S.
                                
 Elsewhere, suspected dollar-selling intervention by South
Korean authorities lifted the won from a four-year low on
Wednesday, but they may not have done enough to stem the slide
in Asia's worst-performing currency this year. [ID:nSP344803].
                                
 The won recently traded down 1.5 percent at 1,147.90 versus
the U.S. dollar.
 (Additional reporting by Wanfeng Zhou; Editing by James
Dalgleish)