* Dollar falls as credit worries linger
* Euro shrugs off drop in German consumer confidence
* Investors await data deluge later in the week
(Recasts, updates prices; changes dateline, previous
LONDON, byline)
By Lucia Mutikani
NEW YORK, July 28 (Reuters) - The dollar eased on Monday as
persistent worries over the financial sector cast a pall over
the health of the U.S. economy despite last week's upbeat
housing and consumer sentiment data.
The euro shrugged off a report showing that German consumer
sentiment hit a five-year low, with investors awaiting a
barrage of economic data from around the world this week which
will culminate with crucial U.S. payrolls figures on Friday.
Worries over the embattled U.S. financial sector were
heightened as Merrill Lynch said Lehman Brothers Holdings Inc
<LEH.N>, may post a loss in the third quarter and take an
additional $2.5 billion write-down on home loans for the
period. On Friday, regulators seized two small U.S. banks.
"Despite very negative data over the last several days, the
euro has surprisingly held its ground," said Boris Schlossberg,
senior currency strategist at DailyFX.com.
"The primary reason for that is the market is very much
worried about systemic risk in the U.S. financial system.
That's really what's propping up the euro. We had the failure
of two more banks...it leaves the market very shell-shocked."
The New York Board of Trade's dollar index, which tracks
the greenback's performance against a basket of six currencies,
dropped 0.3 percent to 72.662 <.DXY>.
The dollar hit a one-month high earlier on Monday at 108.08
yen <JPY=> according to Reuters data, drawing support from the
Reuters/University of Michigan Surveys of Consumers on Friday
showing a jump in its confidence index.
But that momentum quickly subsided as investors' focus
returned to the battered U.S. housing and employment markets
plus inflation headwinds. The dollar last traded down 0.2
percent to 107.62 yen <JPY=>.
"The data was better on Friday, but the broad consensus is
that the U.S. is still suffering. Second-tier data will not be
enough to say 'Yes things are OK,' or 'No they are not,'"
London-based Westpac currency strategist Geoff Kendrick said.
The euro rose despite the forward-looking German GfK
consumer sentiment indicator falling to 2.1 for August from a
downwardly revised 3.6 in July. The figure was the lowest since
June 2003 [].
The euro last traded 0.3 percent higher at $1.5754 <EUR=>,
having touched a two week low of $1.5627 late last week.
Some in the market voiced tentative optimism on the
possibility that the U.S. housing market may stabilize after
Congress passed a rescue package that President George W. Bush
is expected to sign soon.
The package will set up a $300 billion fund to help
troubled homeowners with the aim of ending the deepest housing
slump since the Great Depression. []
But major focus this week lies with a deluge of data
including Friday's U.S. jobs figures, and second-quarter U.S.
GDP on Thursday.
U.S. growth is expected to have increased from the previous
quarter, but the payrolls report is expected to show a loss in
July, which would mark the seventh straight month of declines.
(Additional reporting by Veronica Brown in London)
(Editing by Theodore d'Afflisio)
