* Euro/dlr lifted by ZEW data, but retreats from day's high
* German ZEW indicator rises more than forecast to 56.1
* Riskier FX gain vs dollar, yen as stocks, oil rise
(Updates prices, adds quotes)
By Naomi Tajitsu
LONDON, Aug 18 (Reuters) - The euro rose against the dollar
and the yen on Tuesday, recovering from two-week lows after a
surprisingly strong poll of German investor sentiment raised
some optimism about the euro zone economy.
A recovery in European share prices from steep losses the
previous day also helped to boost currencies considered to be
higher risk which had suffered on Monday. As a result, the
dollar and the yen fell across the board.
The euro hit the day's high against the dollar of $1.4155
after the ZEW economic research institute's economic sentiment
index rose to 56.1 in August from 39.5 in July, its highest
level since April 2006 and beating forecasts for 45.0.
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By 1134 GMT, the pair had retreated to $1.4096, little
changed on the day but above $1.4045 hit on Monday, its lowest
since late July.
Some analysts said the poll suggested the German economy
would continue to grow this year after data last week showed an
unexpected rise in gross domestic product in the second quarter.
But others said the survey, which ended its polling period
after the GDP data, may have been too optimistic and added the
German economy continues to face major hurdles before any
recovery, a view which was helping to cap euro gains.
"Given the extent of the ZEW surprise, the impact on
euro/dollar has been disappointing," said Hans-Guenter Redeker,
chief currency strategist at BNP Paribas in London, adding that
gains in the pair were capped at $1.4155 where technical
resistance lay.
He added tight credit conditions in Germany would continue
next year, raising the possibility the government may have to
come up with more measures to help the economy.
"This are not as rosy as suggested by the ZEW," he said.
RISK SENTIMENT BOOSTED
Against the yen, the euro rose 0.8 percent to 134.05 yen
<EURJPY=R>, having hit a session high of 134.81 yen on EBS, way
above Monday's low of 132.51 yen.
A 1 percent rise in European shares <>, accompanied by
a 0.5 percent gain in U.S. S&P 500 stock futures <SPc1> and a
recovery in oil prices <CLc1> helped lift investor sentiment.
This lent support to the euro and perceived higher risk
currencies such as the Australian dollar, which recovered from
sharp falls against the U.S. dollar and the yen on Monday, while
higher-than-forecast inflation data lifted sterling.
The high-yielding Australian and New Zealand dollars each
rose roughly half a percent against their U.S. counterpart. They
gained more than a full percent against the yen as the Japanese
currency fell across the board.
The dollar rose 0.5 percent to 95.00 yen <JPY=>, while the
dollar index dipped 0.1 percent to 79.199 <.DXY>.
Analysts noted, however, that investors were yet to be
convinced the recent downward move in equities is over.
"The market is waiting to see whether the positive tone in
equities can last into the U.S. session," said Michael
Klawitter, senior currency strategist at Dresdner Kleinwort in
Frankfurt.
Traders awaited readings of U.S. housing starts and producer
prices due at 1230 GMT to see whether the housing market is
improving after severe weakness, and if inflation is rising at
the wholesale level.
(Additional reporting by Jessica Mortimer, editing by Chris
Pizzey)
