* US dollar sags under weight of global imbalances pre-G20
* Fed outlook also weighs on dollar, euro at 1-year high
* Market sentiment firmly to sell dollars on any rally
(Updates prices, adds detail)
By Steven C. Johnson
NEW YORK, Sept 22 (Reuters) - The U.S. dollar slid to a
1-year low against the euro on Tuesday near $1.48 as
deteriorating sentiment on the U.S. currency encouraged selling
ahead of a Federal Reserve meeting and Group of 20 summit this
week.
Traders took advantage of a dollar rally in the prior
session to sell on views the Fed will signal plans to maintain
loose monetary policy well into 2010.
Currency investors are also bracing for G20 leaders to
discuss rebalancing the global economy this week, a process
that would almost certainly require a weaker dollar.
A document obtained by Reuters showed how Washington would
urge G20 leaders to launch a new push this year to get debtor
nations like the United States to save more and exporters like
China, Germany and Japan to spend more. []
"If you take the view that too much of U.S. growth has been
domestically driven, the next logical step is to say an orderly
decline of the dollar -- it's not in anyone's interest to see a
collapse -- in many ways makes sense," said Tom Fitzpatrick,
chief technical analyst at Citigroup in New York.
"And at the end of the day, the U.S. has a zero interest
rate policy and the highest fiscal deficit in peacetime while
(foreign investors) are holding a lot of dollars, so the path
of least resistance for the dollar is down," he added.
The euro was up 0.8 percent at $1.4794 <EUR=> after
options-related demand and strong Asian buying pushed it above
$1.48 for the first time since September 2008. The dollar fell
1 percent to 91.09 yen <JPY=> and 0.9 percent to 1.0231 Swiss
francs <CHF=>, near a 14-month low touched earlier.
Sterling rose 1.0 percent to $1.6375 <GBP=> while the New
Zealand dollar <NZD=> surged more than 2.0 percent to a
13-month high after dairy exporter Fonterra raised its
estimated payout to farmer shareholders. Fonterra accounts for
some 7.0 percent of the New Zealand economy. [].
With no major economic data on the calendar, traders said
$1.4825 may be the next target in euro-dollar, with many
predicting an eventual move back to $1.50.
"Every time we get to a round number in euro-dollar, we'll
probably try to chip away on the way to $1.50. But for now
$1.4825 is the next line in the sand, and then we'll have to
wait and see about $1.49," said Steven Butler, head of FX
trading at Scotia Capital in Toronto.
DOLLAR IN FOCUS AT G20?
European Central Bank Governing Council member Axel Weber
said on Tuesday recent moves in currency markets were "not out
of line" given the euro zone's economic performance relative to
other areas. []
Some said this suggested the ECB was comfortable with the
euro's level and was a green light to push it even higher,
especially in light of the U.S. proposals to put fixing global
imbalances on the G20 agenda in Pittsburgh this week.
But others said there is still a risk of dollar bearishness
engulfing the market and selling turning into a rout.
"A discussion at the G20 on currencies, and especially the
dollar, is not only appropriate but essential, as this move
could accelerate swiftly," said Maurice Pomery, managing
director at Strategic Alpha in London.
(Additional reporting by Jamie McGeever and Naomi Tajitsu in
London; Editing by Dan Grebler)
