* Euro hits 11-wk high vs dollar of $1.3036
* Strong UBS results, equity gains encourage risk demand
* Dollar, yen fall; Aussie, kiwi, sterling all perform well
(Updates prices)
By Jessica Mortimer
LONDON, July 27 (Reuters) - The euro hit an 11-week high
against the dollar and a seven-week high against the yen on
Tuesday as solid bank earnings lifted equities and encouraged
investors to take on more risk.
Strong earnings from Swiss bank UBS <UBSN.VX> helped lift
European shares <> 0.7 percent, with banking stocks
<.SX7P> up more than 4 percent, supporting the market's relief
that last week's European bank stress tests revealed no horrors.
This was another reason to sell the dollar for the euro and
higher-yielding currencies as recent weak U.S. economic data,
contrasting with better data from Europe and Asia, pushed the
U.S. unit to a 12-week low versus a basket of currencies.
"The risk environment is more encouraging and equities are
performing a bit better, which is weighing on the dollar while
risk currencies like the Australian and New Zealand dollars are
performing well," said ING currency strategist Tom Levinson.
At 1115 GMT, the euro had climbed around 0.2 percent on the
day to $1.3036 according to Reuters data, its highest since
early May.
The next target for the euro -- which has risen close to 10
percent since it fell below $1.20 last month -- will be $1.3125,
the 38.2 percent retracement of its November-June fall,
technical analysts said.
Levinson added that if U.S. consumer confidence data due
later on Tuesday were weak it could provide a catalyst for a
move higher. <ECONUS>
Falls were also seen limited while it remained above support
at $1.2870 -- close to its 100-day moving average -- and last
week's low around $1.2730.
The recent run of better euro zone data continued on
Tuesday, with above-forecast euro zone money supply and German
consumer confidence figures. [] []
Against a basket of currencies, the dollar <.DXY> hit a
12-week low of 81.904.
Stronger appetite for risk also weighed on the low-yielding
Japanese yen, with the euro <EURJPY=R> rising to a seven-week
high around 113.96 yen.
RISK CURRENCIES RISE
Underscoring a brighter global outlook, India hiked interest
rates on Tuesday [], citing inflationary pressures
and a firm economic recovery, while the Reserve Bank of New
Zealand is expected to raise rates later this week.
Among perceived higher risk currencies, the New Zealand
dollar <NZD=D4> hit a six-month high against the U.S. dollar,
the Australian dollar <AUD=D4> rose to an 11-week high while
sterling <GBP=D4> hit its strongest level in five months.
"The market has drifted away from fears of a double dip, and
the rate tightening environment -- with a rate hike in India and
one expected in New Zealand -- is attracting flows into higher
yielding and emerging market assets and out of the dollar," said
Peter Frank, currency strategist at Societe Generale.
