* Dollar index dips to fresh 3-month low <.DXY>
* Euro breaks key technical level, up nearly 1 percent
* Solid Chinese data, strong European earnings help risk
* Sluggish U.S. growth weighing on greenback
(Adds comments, details. Changes byline)
By Vivianne Rodrigues
NEW YORK, Aug 2 (Reuters) - The dollar fell to a
three-month low on Monday against a basket of currencies on
fears the U.S. recovery is faltering.
Strong European earnings meanwhile pushed sterling to a
six-month high against the greenback.
The euro neared $1.32 for the first time since early May,
with its rally picking up steam after the currency broke above
$1.3125, a key technical level. The Australian dollar hit a
three-month peak after data showed Chinese manufacturing
expanded for a 17th straight month. []
Signs of weaker U.S. growth have weighed on the dollar in
recent weeks. Data on Friday showed growth slowed to a 2.4
percent annual rate in the second quarter and Federal Reserve
Chairman Ben Bernanke on Monday said the economy is still far
from achieving full recovery. []
Currency traders paid little attention to U.S. data on
Monday showing stronger than expected manufacturing growth.
However, the Chinese data and recent solid reports from
Europe have investors hopeful the world economy can grow even
if U.S. recovery sputters. That has boosted appetite for higher
risk currencies and pushed them through technical levels.
Analysts said the euro's rally accelerated after it broke
$1.3125 <EUR=>. That marked a three-month high and the 38.2
percent retracement of a decline that began in November and
took the euro to $1.1876 in June, its lowest since 2006. It was
last up 1 percent at $1.3181.
A close around these levels, analysts said, would be a
bullish sign, with $1.3510, the 50 percent retracement of the
November-to-June move, a potential target. But traders said
barriers around $1.3200, $1.3250 and beyond could make it a
slow and difficult climb.
"It's a broad dollar-weakness story right now," said
Sebastien Galy, senior strategist at BNP Paribas in New York.
"If we close above key technical levels on the euro, we may
be in for a sharp acceleration."
An index of the dollar <.DXY> against six major currencies
fell 0.8 percent and was nearing its 200-day moving average,
another important technical level that, if breached, could
suggest further losses ahead, analysts said.
Sterling hit a six-month high versus the dollar <GBP=D4> of
$1.5897 and hit a four-week high against the euro <EURGBP=D4>.
Robust results from HSBC <HSBA.L><0005.HK> and BNP Paribas
<BNPP.PA> helped risk sentiment and boosted European shares
<>.
Some analysts said more than the increase in profitability,
some of the European bank earnings report showed that quarterly
provisions to sustain losses had been cut in half.
"This helped ease concerns regarding the broader European
banking community and has propelled the euro higher," said Dan
Cook, a senior market analyst at IG Markets Inc. in Chicago.
Cook added that despite today's rally, the next major area
of resistance may not come into play until $1.3270 and
$1.3290.
US STOCKS ALSO RALLY
U.S. stocks gained as equities investors ignored the GDP
numbers to focus on strong earnings and data that showed the
U.S. manufacturing sector slowed only moderately in July. See
[]
"What's happening is the rest of the world doesn't look so
bad and the U.S., while sluggish, doesn't look dire yet," said
Joseph Trevisani, chief analyst at FX Solutions in Saddle
River, New Jersey. As long as China doesn't fall off a cliff,
the easy currency play is to keep buying risk, particularly the
Australian and Canadian dollars."
The dollar also fell against the Australian and Canadian
dollars, with the Aussie hitting a three-month peak earlier at
$0.9147 <AUD=D4>.
(Additional reporting by Steven C. Johnson and Nick Olivari
in New York and Neal Armstrong in London; Editing by Andrew
Hay)
