* Dollar falls vs high yielders as risk aversion cools
* Euro edges up, shaking off weak French output data
* UK industrial output rise lifts sterling <GBP=>
(updates throughout)
By Naomi Tajitsu
LONDON, June 10 (Reuters) - The dollar fell against
higher-yielding currencies on Wednesday, prodded lower by a
retreat in risk aversion as global stock prices were lifted by
investor optimism about an improvement in the global economy.
The U.S. currency struggled, having relinquished gains made
early in the week on anticipation that positive U.S. economic
data may prompt the Federal Reserve to raise interest rates by
year-end, a view which was now being reassessed by the market.
Advancing stocks reflected renewed interest in riskier
assets, supporting high yielders including the Australian and
New Zealand currencies at the expense of the dollar.
"Risk appetite seems to be taking over now and with equities
moving higher and volatility coming down, all these issues are
working against the dollar," said Ian Stannard, senior FX
Strategist at BNP Paribas.
The euro <EUR=> rose as high as $1.4144, according to
Reuters data, roughly half a percent higher on the day, before
pulling back slightly to $1.4095 by 1144 GMT.
Supporting the euro was a 2.2 percent rise in European
shares <>, which also helped to Australian <AUD=D4> and
New Zealand dollars <NZD=D4> each up roughly 1 percent against
the dollar.
The euro offered limited reaction to a greater-than-expected
fall in French industrial output in April, which contracted 1.4
percent against a fall of 0.2 percent predicted by economists
[].
Despite the big fall, some analysts were hopeful that the
weakness in production may have peaked, and that further
sluggishness may be less pronounced.
Other production figures were more optimistic, with data
showing Italian industrial output rose 1.1 percent in April on a
seasonally adjusted basis, marking the first increase after
nearly a year of monthly declines [].
The pound climbed 0.3 percent <GBP=> to $1.6371 after data
showed UK industrial output rose unexpectedly by 0.3 percent in
April for the first time since February 2008, a sign that
Britain's economy may be emerging from a recession.
U.S. DATA AWAITED
Against a basket of currencies, the dollar was flat at
79.814 <.DXY>, off the high of 81.466 hit on Monday after
positive jobs data from the U.S. heightened expectation that the
Fed would move to raise interest rates earlier than anticipated.
U.S. rate futures trimmed such expectations and short-dated
Treasuries rallied on Tuesday, pulling yields down from recent
seven-month highs, after a solid auction of three-year notes.
But longer-dated issues struggled as the market awaited its
big test in the form of $19 billion in 10-year notes for sale on
Wednesday and $11 billion in 30-year bonds on Thursday.
Due to increasing focus on the health of the U.S. economy,
as well as the wider global community, markets awaited U.S.
trade figures due at 1230 GMT. Expectations are for a $29.0
billion deficit in April vs $27.58 billion in March.
"The data will help to define the dollar's direction, so if
we see a bad number, there's a decent chance of a dollar
sell-off across the board," said Naeem Wahid, currency
strategist at Bank of Scotland Treasury Services in London.
Market participants also anticipated a two-day meeting of
finance ministers from the Group of Eight nations in Italy
beginning on Friday, although few in the market expected that
foreign exchange would take the spotlight at the gathering.
A French Finance Ministry source told Reuters the
participants would not discuss currency issues due to the
absence of central bankers at the meeting. []
(Additional reporting by Harpreet Bhal; editing by Andy
Bruce)
