(Recasts; updates prices, adds comment, changes byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, April 17 (Reuters) - The dollar posted gains on
Thursday, as investors felt more confident about the outlook
for the troubled financial sector, with U.S. companies'
earnings so far generally revealing no major negative
surprises.
The greenback also got a lift against the euro earlier
after a euro zone official said the recent appreciation in the
European single currency was undesirable.
The euro had soared to a record just shy of $1.60 before
retreating when Eurogroup head Jean-Claude Juncker complained
about the currency's strength against the dollar.
In the stock market, U.S. equities closed little changed,
with the companies reporting earnings on Thursday showing mixed
results. For instance, markets reacted positively to Merrill
Lynch & Co Inc <MER.N> after it reported subprime mortgage
write-downs of $6.5 billion, meeting analysts' expectations.
Optimism on Merrill, however, was offset by cautious
outlooks from eBay Inc <EBAY.O> and United Technologies Corp
<UTX.N>.
"It was a good day for the dollar overall. We are seeing
increasing optimism that the worst of the financial system's
problems may be behind us," said Ken Landon, global currency
strategist at JP Morgan Chase in New York.
"We've had earnings reports from financial institutions and
there haven't been real ugly surprises. People are now looking
forward to the rebuilding process and investors are more active
in seeking riskier assets," he added.
In late afternoon trade, the euro fell 0.4 percent to
change hands at $1.5880 <EUR=>.
Traders said a big part of the euro's pullback can be
attributed to Juncker's remarks. The Eurogroup chairman also
said markets misunderstood a statement last weekend by the
Group of Seven that voiced concern over sharp fluctuations in
major currencies.
The Eurogroup comprises finance ministers from the 15
countries that use the euro, and some fear an excessively
strong currency will undermine growth in the region.
"The market is going to disregard anything about the G7
right now because it is not clear what the G7 wants or has in
mind," said Mark Frey, head of FX trading at Custom House
Global Foreign exchange in Victoria, Canada.
"I think those people who are counting on intervention once
we hit $1.60 in euro/dollar are giving up that would occur," he
added.
The dollar was up about 0.9 percent against the Japanese
yen at 102.64 yen <JPY=> and rose 0.8 percent against the Swiss
franc to 1.0075 francs <CHF=>.
Earlier, a sharp fall in the Philadelphia Fed's business
index for April briefly trimmed some dollar gains, but
investors resumed buying the greenback after Dallas Fed
President Richard Fisher indicated a reluctance to cut U.S.
interest rates.
Fisher said an accommodative monetary policy could cause
inflation and it is important for the Fed to have a steady
hand, not a "trigger finger."
The Fed is still widely expected at its April 29-30 meeting
to lower the benchmark federal funds rate target from its
current level of 2.25 percent to support an economy struggling
under the weight of deep housing and credit crises.. That would
be in addition to 3 percentage points of cuts it has enacted
since September.
This was in stark contrast to the European Central Bank,
which has left rates at 4 percent for more than a year to fend
off record high euro-zone inflation.
Sterling rose 0.9 percent to $1.9903 <GBP=> after a UK
Treasury source said authorities could announce as early as
next week details of a plan to ease tight conditions in the
British mortgage market.
(Additional reporting by Steven C. Johnson; editing by Gary
Crosse)
