* US dollar under pressure as risk appetite increases
* Euro trades at fresh 2009 high
* Higher-yielding currencies rise
(Adds comments, details, updates prices)
By Vivianne Rodrigues
NEW YORK, Sept 9 (Reuters) - The U.S. dollar fell on
Wednesday, touching new lows for 2009 against major currencies,
as investors moved to riskier assets like stocks and
higher-yielding currencies.
The rally in European and U.S. stocks has supported hopes
for economic recovery, and together with the drop in U.S.
dollar borrowing costs, has encouraged investors to look for
higher returns around the world.
Renewed concerns over the dollar's long-term status as the
world's reserve currency and options-related euro buying also
contributed to the sell-off, which started on Tuesday.
"The dollar trade is ultimately a risk trade. That is, as
risk appetite improves, the dollar gets hurt," said Boris
Schlossberg, a director for currency research at GFT Forex in
New York.
"The move lower started once a key technical barrier on
euro/dollar was lifted late on Friday," he added. "Large
options contracts expired and that enabled traders to push the
euro through $1.45 and now the target is $1.46. The rise in
stocks and commodities is contributing to the move."
In midday trading in New York, the euro rose 0.6 percent to
$1.4571 <EUR=> after briefly touching $1.46, a fresh 2009 high,
according to Reuters data.
UBS AG analysts cut forecasts for the dollar, saying in a
note that they raised their one-month euro/dollar forecast to
$1.45 from $1.40 and 3-month forecast to $1.35 from $1.30.
"The combination of risk seeking U.S. investors
diversifying their portfolios and equities rallying further
will keep the dollar weak near term," said Geoffrey Yu, a
currency strategist at UBS.
The dollar index <.DXY>, which tracks the performance of
the greenback versus a basket of six other major currencies,
fell 0.6 percent to 76.86. It touched 76.810 earlier, its
lowest since late September 2008.
A record number of U.S. dollar index futures contracts
traded hands on Tuesday as volume picked up with the end of the
summer holidays in the U.S.
Against the yen, the dollar fell 0.7 percent to 91.68 yen
<JPY=>, near a seven-month low.
CARRY TRADES
Low interest rates in the United States may be leading some
traders to favor the greenback as a funding currency for carry
traders instead of the Japanese yen, which in turn hurt the
dollar, analysts said. In carry trades, investors finance
purchases of higher-yielding assets by borrowing in lower
yielding units.
"A growing number of investors may be using the dollar as
the carry funding currency, which is contributing to its
decline," said Schlossberg at GFT. "But that proposition is
very risky. It implies a low risk scenario for the funding
currency, and economic fundamentals in the U.S. are not that
jolly."
Commodities, including oil and gold, rose again on
Wednesday, which also helped higher-yielding currencies, such
as the Australian and New Zealand dollars, as well as emerging
markets assets such as the South African rand, which earlier
touched a fresh 13-month high against the dollar <ZAR=>.
Investors' focus now me be turning to monetary policy
decisions. Over the next 24 hours, the Reserve Bank of New
Zealand, the Bank of England and the Bank of Canada will hold
monetary rate-setting meetings.
Due later on Wednesday is the Federal Reserve's Beige Book,
a summary of economic conditions in 12 Fed districts. Data on
Tuesday showed U.S. consumer credit fell by a record $21.6
billion, raising concerns about the pace of recovery.
(Editing by Kenneth Barry)
