* Dollar index touches fresh one-year high
* Euro drops to new 11-month low versus dollar
* Dollar recovery theme continues to dominate
* Lehman results show preliminary share loss of $5.92
(Recasts, updates prices)
By Lucia Mutikani
NEW YORK, Sept 10 (Reuters) - The dollar rose on Wednesday,
scaling a new one-year peak against a basket of currencies as
it was fueled by retreating crude oil prices and as market
focus reverted to softening growth outside the United States.
Analysts said U.S. investors were liquidating their
positions in overseas equity and bond markets, repatriating the
money back home and lending support to the dollar.
The greenback largely shrugged of news that Lehman Brothers
<LEH.N>, the fourth-largest U.S. investment bank, recorded a
third-quarter loss and failed to announce firm deals to raise
desperately needed capital.
"The price action continues to show that the market remains
short the dollar, they haven't yet gone long on the dollar,"
said Adam Fazio, a senior currency strategist at CIBC World
Markets in New York.
"Every rally against the dollar is met with strong selling
interest. It doesn't seem that the downswing in the stock
market is really hurting the dollar. The massive unwind of
dollar shorts will continue."
The ICE Futures U.S. dollar index, which measures the
dollar's value against a basket of six currencies, climbed as
high as 79.976 <.DXY>, a level that was last seen in September
2007. It was last at 79.863, up 0.6 percent on the day.
Those gains came as the euro tumbled to a fresh 11-month
trough of $1.4013 on a combination of softening crude oil
prices and worries that growth in the euro area could slow more
sharply than previously anticipated.
The European single currency was last down 0.7 percent at
$1.4037 <EUR=>.
EURO ZONE GROWTH FORECASTS CUT
The European Commission on Wednesday lowered its 2008 euro
zone growth forecast to 1.3 percent from 1.7 percent. It
reduced its growth estimates for Britain to 1.1 percent from
1.7 percent.
Analysts said despite the poor growth outlook, it was
unlikely that the European Central Bank would cut interest
rates anytime soon, while the Federal Reserve's aggressive
easing put the U.S. economy on a recovery path.
Retreating oil prices were also seen aiding the recovery
process. U.S. crude oil futures tumbled to fresh five-month
lows around $101.36 per barrel.
"The Fed is the one central bank in the world that is more
cognizant of the downside risks to growth than the ECB, which
is singularly focused on inflation," said Samarjit Shankar,
global FX Strategist at Bank of New York Mellon in Boston.
"In this present environment, currency markets are
rewarding the currencies which have central banks that are also
aware of the downside risks to growth. The Fed stands out and
the dollar is being rewarded."
The dollar rose against the yen, with analysts citing
market talk of possible downgrading of Japan's sovereign debt.
The dollar was last up 0.9 percent at 107.80 yen <JPY=>. It
climbed 0.7 percent to 1.1340 Swiss francs <CHF=>.
"Other that what it did to the Dow, I don't think Lehman
had that much of an impact," said CIBC World Markets' Fazio.
"The implication that it could follow through to a multiple
other financial institutions is more of a concern, but one firm
of Lehman's size does not impact on the FX market in a material
way. Lehman is not that big, it's not Citibank."
Traders showed limited reaction to European Central Bank
President Jean-Claude Trichet, who on Wednesday told the
European Parliament it would be naive to think markets will
return to their pre-turbulence state. [].
(Editing by Chizu Nomiyama)
