* German data, stock advance weigh on dollar and yen
* Euro lifted by German data but retreats from day's high
* Weaker-than-expected U.S. data keeps traders cautious
* SNB says will not tolerate franc strength vs euro
(Updates prices, adds quotes, details, changes byline)
By Wanfeng Zhou
NEW YORK, Aug 18 (Reuters) - The U.S. dollar and yen fell
on Tuesday after a strong report on German investor sentiment
and gains in stock markets worldwide eroded safe-haven demand
for the two currencies.
The euro rose from multi-week lows against the dollar and
yen, while sterling gained as data showed UK consumer prices
held steady in July. A rise in oil prices also helped the New
Zealand and Australian dollars rebound from Monday's slide.
Global stock markets recovered from the previous day's
sharp fall, boosting risk appetite and more than offsetting a
surprise drop in U.S. housing starts in July.
"We had the strong ZEW survey and that bolstered sentiment,
(which) spilled over into the U.S.," said Matthew Strauss,
senior currency strategist at RBC Capital Markets in Toronto.
"The market became a little bit more confident that maybe
yesterday's sell-off was a bit excessive."
"Although (U.S. data) came in slightly softer than
expectations, it did not derail the notion that a clear bottom
is forming in U.S. housing activity; neither did it derail the
tentative return of risk appetite," he added.
In mid-afternoon trading, the euro was up 0.4 percent at
$1.4130 <EUR=>, above Monday's two-week low of $1.4044. It hit
$1.4155 after data from Germany's ZEW think tank showed
investor sentiment improved more than expected in August to its
best level since April 2006. For more see [].
The euro was also up 0.7 percent at 133.83 yen <EURJPY=R>
while the dollar added 0.2 percent to 94.69 yen <JPY=>.
Markets welcomed news of improved investor sentiment in
Germany, which came after data showed the country, the euro
zone's biggest economy, exited recession in the second quarter.
But analysts said the hurdles it faces were capping gains.
CMC Markets chief market strategist Ashraf Laidi in London
said the "lack of follow-through" -- euro gains stalled around
$1.4155 -- underscored the tentative mood among investors.
"Each recovery in the euro lately is looking more and more
short-lived," he said. "The question becomes: Is the market
betting on a recovery that is far from confirmed?"
HOUSING DATA
The ICE Futures U.S. dollar index <.DXY>, which tracks the
performance of the greenback versus a basket of six other major
currencies, was down 0.4 percent on the day.
Losses in the dollar were limited as data showing an
unexpected 1 percent slide in U.S. housing starts in July
unnerved some investors, as did a larger-than-expected 0.9
percent slide in producer prices last month. []
The troubling data came after a survey late last week
showed U.S. consumer confidence fell for a second consecutive
month in July, adding to concerns that hopes for a robust
rebound in the remainder of 2009 may have been overdone.
"We've seen a sharp sell-off in risk in the past two days,
with the dollar rising on worries about the state of the U.S.
consumer," said Andy Busch, global foreign-exchange strategist
at BMO Capital Markets in Chicago. "That theme hasn't changed
yet despite today's rebound in the euro."
Sterling rose 1.5 percent to $1.6576 <GBP=>, boosted by
better-than-expected inflation data. []
The euro pared gains against the Swiss franc to $1.5197
<EURCHF=> after Swiss National Bank board member Thomas Jordan
said authorities won't tolerate franc appreciation against the
euro. The SNB has intervened to weaken the franc this year.
[]
(Additional reporting by Steven C. Johnson; Editing by James
Dalgleish)
