* U.S. dollar rises above 101 yen, highest since Oct 2008
* Drop in stocks rekindles risk aversion
* Soros says US dollar may be replaced as reserve currency
(Adds comments, updates prices, changes byline)
By Vivianne Rodrigues
NEW YORK, April 6 (Reuters) - The U.S. dollar rose broadly
on Monday, as stocks in Europe and on Wall Street fell on
fading optimism about a global economic recovery, prompting
investors to buy the greenback as haven.
The yen fell earlier to a nearly six-month low versus the
dollar and the euro, with investors selling the Japanese
currency in response to a rise in global stocks, particularly
the Nikkei index. But as equities fell, the yen trimmed losses
versus the dollar and turned higher against the euro.
"When equities move up, euro/dollar goes higher, and when
stocks move down, euro/dollar goes lower," said Greg Salvaggio,
senior vice president for capital markets at Tempus Consulting
in Washington. "But the dollar's gains versus the euro are
nothing to get excited about. The euro is consolidating between
$1.31 to $1.36."
Salvaggio said the euro/dollar pair will keep
range-trading until there is evidence that the global economy
has bottomed.
"We will have to see three or four months of data to judge
whether the worst is behind us," he said.
In afternoon trading in New York, the euro fell 0.7 percent
versus the dollar to $1.3384 <EUR=>. The ICE Futures' dollar
index, a gauge of the dollar's value against six major
currencies, was also 0.7 percent higher at 84.81 <.DXY>.
Demand for dollars tend to rise in response to bad news
because investors view it as the safest store of value at a
time when economies around the world are contracting.
The dollar rose earlier to 101.45 yen <JPY=>, the highest
level since October 2008, according to Reuters data. It last
traded at 100.70, up 0.5 percent on the day.
The move above 101.00 yen was considered technically
significant by some analysts but Barclays Capital said in a
note the dollar and the yen are likely to trade within a 95-100
range. Still they added, any move in the spot exchange rate,
such as today's break above this range, "provide opportunities"
for investors to sell on rallies.
FX MARKET VULNERABLE
The euro <EURJPY=R> fell against the yen to 134.65, down
0.4 percent. Earlier, it rose to 137.43, its strongest level in
more than five months.
Sterling slid against the dollar, erasing earlier gains
that had propelled it to a two-month high against the U.S.
currency. The pound, which is also highly sensitive to equity
market moves and investor sentiment along with the euro, was
last at $1.4722 <GBP=>, down 0.7 percent.
Analysts said the market remained vulnerable to swings in
risk appetite and warned it may be premature to assume that the
worst of the global credit crisis was over.
Adding to the dollar's safe-haven allure were comments by
billionaire investor George Soros that the U.S. economy is in
for "a lasting slowdown" and won't recover this year. He also
said "the banking system as a whole is basically insolvent."
But Soros also told Reuters Financial Television the U.S.
dollar may eventually be replaced as world reserve currency,
possibly by the International Monetary Fund's Special Drawing
Rights. For story, click on [].
Investors now are turning their attention to the few U.S.
economic highlights on the week, with reports on trade,
wholesale inventories and import prices still due. The Federal
Reserve is also going to release minutes of its March
rate-setting meeting.
(Additional reporting by Gertrude Chavez-Dreyfuss)
