* Euro/dollar at 6-wk high, dollar index at 6-week low
* Positive U.S. corporate earnings boost risk demand
* CIT strikes last-minute rescue deal, sources say
* Risk assets overextended, may be due for a correction
(Updates prices, adds comment, changes byline)
By Steven C. Johnson
NEW YORK, July 20 (Reuters) - The dollar weakened broadly
on Monday, hitting a six-week low against the euro, as strong
U.S. corporate earnings prompted investors to plunge back into
high-yielding currencies and other risky assets.
Reports of a last-minute rescue for ailing U.S. lender CIT
Group boosted optimism, helping push the euro to $1.4249, its
highest level since early June. For more, see []
An index of the dollar against six major currencies hit a
six-week low <.DXY>, while the yen fell and the Australian and
New Zealand dollars soared. Both rose last week when Goldman
Sachs <GS.N> and Intel <INTC.O> reported strong second-quarter
earnings, fanning hopes that an economic recovery is underway.
"It's a risk-preference story. With equities firmer and
breaking some semi-interesting levels, the dollar has come
under pressure as a result," said John McCarthy, director of
foreign exchange at ING Capital Markets in New York.
Volume was lighter than usual, however, with Tokyo
shuttered for a local holiday.
The euro was last up 0.9 percent at $1.4220 <EUR=>. A climb
above $1.4337 touched in early June would take the pair to its
highest level of the year.
The euro also added 0.9 percent to 134.00 yen <EURJPY=>
while the dollar was flat at 94.25 yen <JPY=>.
Sterling rose 1.2 percent to $1.6525 <GBP=D4>, near a
three-week high hit earlier, while the New Zealand dollar
neared its 2009 high of $0.6595, rising 1.7 percent to $0.6565
<NZD=>. Australia's dollar rose 1.4 percent to $0.8130 <AUD=>.
SEEING IS BELIEVING
Some analysts said the euro looked overextended, especially
after it failed to add to its gains following an upbeat report
on U.S. leading indicators. [].
The euro and high-yielders like the Australian dollar "are
having a really impressive run, which leaves them vulnerable to
profit-taking if upcoming data or earnings undershoot the
market's elevated expectations," said Omer Esiner, market
analyst at Travelex Global Business Payments in Washington.
HSBC in a research note pointed out that stock market gains
also look set to fade and say some of the current rally may be
a "squeeze" of investors who expected a summer slump to follow
last spring's rally.
"We're not sure that a lot more people now 'believe' the
stock market will continue to rally from here," said HSBC.
But for now, investors are content to run with the pack,
said Jay Meisler, principal of Global-view.com, an online forum
for traders and investors.
"I get the sense there is some skepticism over this latest
bout of risk appetite but it is hard to stand in the way," he
said, "especially when forecasts, such as the one from Goldman
Sachs today, get raised."
Goldman raised its year-end target on the Standard & Poor's
500 index <.SPX> to 1060 from 940 on Monday. []
Still to come this week are earnings from American Express,
State Street and Bank of New York-Mellon.
Federal Reserve Chairman Ben Bernanke is expected to offer
an upbeat assessment of the economy before Congress on Tuesday.
Investors will listen for Fed plans to start withdrawing some
of trillions of dollars spent to help the economy through the
crisis.
(Additional reporting by Gertrude Chavez-Dreyfuss; Editing
by Chizu Nomiyama )
