* Dollar falls, recovering shares boost risk demand
* Euro climbs after surprisingly strong ZEW survey
* Market awaits BRICs meet after Russia comments
(Adds comments, details, updates throughout)
By Naomi Tajitsu
LONDON, June 16 (Reuters) - The dollar fell broadly on
Tuesday as a recovery in European shares piqued appetite for
currencies seen as higher-risk, while the euro extended gains
after a strong reading of German economic sentiment.
The dollar stumbled after Russian President Dmitry Medvedev
underlined the need for new global reserve currencies before a
BRICs summit, which traders took as a signal that Moscow may be
looking to cut the share of U.S. assets in its currency
portfolio [].
The German think tank ZEW said its economic sentiment index
rose to 44.8 in June, surging from 31.1 in May and exceeding
expectations for a 35.0 print []. This suggested
market optimism that the economy will recover later this year.
"Risk is back on the table today ... The recovery risk
appetite layered atop the improvement in the ZEW has provided
the fuel to get (euro/dollar) above $1.39," said Jeremy Stretch,
strategist at Rabobank in London.
Adam Cole, global head of currency strategy at RBC in
London, said the ZEW's strength was prompted by the recent rally
in stocks, which are seen to be correlated with the survey.
The next test of health for the German economy would be
whether the strength seen in the ZEW survey would feed through
to other measures of sentiment and industry, he said.
By 1107 GMT, the euro traded 0.8 percent higher at $1.3905,
after climbing as high as around $1.3923 after the ZEW poll.
The euro recovered from $1.3748 hit on trading platform EBS
early on Tuesday, its lowest since May.
Some market participants said options up for redemption
during New York trade may incite euro/dollar volatility. IFR
reported that 200 million euros' worth of options with a strike
price of $1.3900 would expire on Tuesday.
European shares <> shook off early losses to climb 0.5
percent, while U.S. stock futures <SPv1> rose 0.3 percent. This
helped to push the high-yielding Australian <AUD=D4> and New
Zealand <NZD=D4> dollar each roughly 1 percent higher.
The dollar index <.DXY> fell 0.9 percent on the day.
Sterling <GBP=D4> traded 0.8 percent higher at $1.6437,
after data showing a smaller-than-expected fall in UK inflation
fuelled expectations that the Bank of England may not need to
continue quantitative easing much longer. It rose to a 2009 high
against the euro at 84.37 pence <EURGBP=R>.
The dollar <JPY=> traded 1.0 percent lower at 96.80 yen,
after falling to 96.08 yen on EBS in early European trade.
Traders offered limited reaction to The Bank of Japan's
upgrade of its economic assessment on Tuesday, which came after
the central bank held interest rates at 0.1 percent.
BRICS AWAITED
Traders awaited a summit of BRICs emerging nations --
Brazil, Russia, India and China -- in Russia, which comes amid
rising market speculation that countries may be looking to
diversify reserves portfolios. At the moment, these contain a
hefty amount of U.S. assets.
Medvedev's comments came after Russian Finance Minister
Alexei Kudrin at the weekend said the dollar's status as the
world's main reserve currency was unlikely to change in the near
term, clouding the market's understanding of Moscow's position.
Any negative remarks on the dollar, particularly from China,
which holds the world's largest pile of currency reserves, would
hurt confidence in the U.S. currency, analysts said.
"(The dollar's slide) underlines the likely sensitivity of
the FX market to comments emerging from today's meeting,"
analysts at Barclays wrote in a research note.
"That said, it is unlikely that any concrete decision on an
alternative to the USD as a reserve currency will reached," the
said, adding that any currency reaction to comments from the
meeting would likely be short-lived.
(Reporting by Naomi Tajitsu; Editing by Victoria Main)
