* Dollar rises before start of US earnings season
* Higher-yielding currencies down as risk appetite wanes
* Euro extends losses after euro zone Q4 GDP revised lower
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By Vivianne Rodrigues
NEW YORK, April 7 (Reuters) - The U.S. dollar gained on
Tuesday as a drop in global stocks ahead of the start of what
is expected to be a weak corporate results season, boosted the
greenback's allure as a safe haven.
The yen also rebounded, with short-term market players
unwinding trades in higher-yielding currencies such as the
Australian and New Zealand dollars that had been financed with
the Japanese currency because of its low interest rates.
Data in Europe showing the euro zone economy recorded its
deepest-ever quarterly fall in the fourth quarter of 2008, also
weighed on the euro. For details, see []
Bank stocks and industrial conglomerate shares led declines
in Europe and on Wall Street.
"There is caution ahead of the earnings season," said
Matthew Strauss, senior currency strategist at RBC Capital
Markets in Toronto. "Although we had some optimism about the
economy in recent sessions, this earnings season would be a
reality check."
Investors will learn more about the recession's toll on
U.S. corporate profits in the comings weeks. According to data
from Thomson Reuters, first-quarter earnings for S&P 500
companies are expected to fall by almost 37 percent versus a
year ago as global demand slumps.
In afternoon trading in New York, the euro fell 1.1 percent
to $1.3255 <EUR=> after hitting a session low of $1.3228.
Selling in the euro accelerated after data showed a record
contraction in the euro zone economy.
In Europe, data was revised down to show the euro zone
economy fell 1.6 percent in the fourth quarter from a previous
1.5 percent contraction. The report coincided with a 12th
straight month of decline in British manufacturing output in
February and a record 50 percent fall in March steel output in
Germany. []
Meanwhile, a Business Roundtable survey released earlier
showed U.S. chief executives' confidence in the economy set a
second consecutive all-time low in the first quarter. More than
two-thirds of the CEOs surveyed said they planned more layoffs
and capital spending cuts in the next six months.
[].
The dollar rose 0.6 percent against a basket of currencies
to trade at to 85.211 <.DXY>. Investors tend to buy the dollar
as a haven amid global risk aversion despite weak U.S. economic
fundamentals.
RISK AVERSION
Eurodollar is being "driven down by a return to risk
aversion," said Dan Cook, a senior market analyst at IG Markets
Inc. in Chicago.
Cook said that if declines in stocks accelerate in the
afternoon, eurodollar may once again move lower and test
earlier session lows at 1.3228-1.3227.
The euro also slid against the yen to trade almost 2
percent lower at 132.90 yen <EURJPY=>. The dollar was down 0.6
percent at 100.32 yen <JPY=> after dipping to 99.88 yen, but
the greenback gained broadly elsewhere.
Meanwhile, the Australian dollar see-sawed against its U.S.
counterpart after the Reserve Bank of Australia cut interest
rates by 25 basis points to a record low 3.0 percent.
[]. The Australian dollar was last 0.2 percent
lower at US$0.7115 <AUD=>
Also on Tuesday, the Bank of Japan announced it was leaving
interest rates at 0.1 percent. The decision was widely
expected, though the BOJ also unveiled further steps to ease
credit strains, announcing it would start lending against a
wider range of municipal debt to support regional banks.
[].
(Additional reporting by Gertrude Chavez-Dreyfuss)
(Editing by Theodore d'Afflisio)
