* Dollar falls broadly, euro/dollar hits 6-week high
* Share prices up 1.4 pct, boosting risk demand
* CIT Group strikes last-minute rescue deal
(Adds comment, details, updates prices)
By Nick Vinocur
LONDON, July 20 (Reuters) - The dollar fell broadly on
Monday, hitting a six-week low against the euro, as traders
flocked to riskier assets as a rescue for U.S. lender CIT and
hope for more solid corporate earnings boosted share prices.
A further pick-up in risk appetite pushed the euro to around
$1.4248 according to Reuters data, its strongest since early
June, and lifted European stocks by 1.4 percent. This helped to
push the dollar to a six-week trough versus a currency basket.
The last-minute financing deal for CIT Group late on Sunday
was also helping risk sentiment as it eased concerns the lender
would have to seek bankruptcy protection. []
Assets considered to be higher risk extended gains after
rallying last week when investors took mixed U.S. corporate
earnings as an optimistic sign that the economy is improving.
"A big relief was this CIT news -- that's what's been
driving the (equity) market higher and, as a result, driving
euro and sterling higher," said Audrey Childe-Freeman,
strategist at Brown Brothers Harriman in London.
Volumes were light with Tokyo shut for a local holiday.
At 1114 GMT, the euro <EUR=> traded a full percent higher at
$1.4214. A euro/dollar climb above $1.4339 touched in June would
take the pair to its highest level of the year.
The dollar index <.DXY> was down 0.6 percent at 78.867,
after falling as low as 78.799, its lowest since early June.
The U.S. currency struggled broadly, pushing sterling and
the Australian and New Zealand currencies each up as much as 1.5
percent. The New Zealand dollar rose near its 1-year high.
Despite broad weakness, the dollar rose 0.3 percent to 94.47
yen as risk demand also stung the Japanese currency. This helped
to push the UK and antipodean currencies up around 1.5 percent
against the yen.
MORE EURO GAINS?
The euro's climb on Monday lifted it above the 50 percent
Fibonacci retracement level of the pair's peak-to-trough move in
2008, which was located around $1.4190.
Some technical analysts said this opened the way for further
gains in the pair, while others were less optimistic, pointing
out that previous efforts to do so have proved unsuccessful.
"The market is going to be bid over the next day or two but
I don't see dollar weakness lasting past the end of the week,"
said Tom Pelc, head of technical strategy at RBS in London.
"I don't think the market can get above $1.46 on any kind of
continued upward move," he added, referring to the next key
Fibonacci level, the 61.8 percent retracement.
Growing expectations of an improvement in the U.S. economy
have sent investors searching for higher yields.
Last week, Goldman Sachs Group and JPMorgan Chase reported
better-than-expected results for the second quarter, while Bank
of America posted a lower quarterly profit.
U.S. financials reporting this week include American
Express, State Street and Bank of New York Mellon. Some analysts
said disappointing earnings from those firms may trigger risk
aversion and prompt selling in high-risk assets.
Federal Reserve Chairman Ben Bernanke will start his
semi-annual testimony to the U.S. government on Tuesday.
Many in the market said the focus would be on any reference
to a possible exit strategy from quantitative easing, while some
analysts pointed out that a less-than-optimistic view of the
economy may cut risk demand.
"If sterling and the euro are looking increasingly
overbought, more cautious remarks from the Fed may give people
the opportunity to take profits (from recent gains), and we
could see a correction," said BBH's Childe-Freeman.
(Additional reporting by Naomi Tajitsu, editing by Toby Chopra)
