* Euro/dollar little changed, concerns about banks weigh
* Euro relinquishes gains made on strong German ZEW
* Risk averse environment continues, stocks suffer
(Releads, adds quotes, update prices)
By Naomi Tajitsu
LONDON, April 21 (Reuters) - The euro was little changed on
Tuesday, retreating from a session high against the dollar as a
slide in regional shares helped to stub out gains made on a
bigger-than-expected improvement in German investor sentiment.
Despite a strong ZEW survey, the pair hovered in range of a
one-month low hit on Monday, as investors remain cautious about
the global economy given more poor earnings results from U.S.
banks.
Bank of New York Mellon Corp <BK.N> on Tuesday said its
profits fell by more than half in the first quarter, while State
Street Corp said it saw its operating revenue fall 8-12 percent
in 2009.
Their earnings reports helped to drive share markets lower,
as they added to the view financial institutions are continuing
to struggle, and that their recovery will require more time.
Market participants said currencies were being jerked around
by moves in other financial markets, which were reacting to
earnings reports and economic data that offered mixed signals
about the health of the global economy.
Phyllis Papadavid, currency strategist at Standard Chartered
in London, said this was helping to keep risk aversion high,
which would likely benefit currencies perceived to be safe-haven
assets, including the dollar and the yen.
"Equities and macro data are blowing hot and cold at the
moment so directionally we think there's upside in the dollar
and the yen," she said.
"The signals from equities have been mixed and the forex
market has taken that on board. If you take the macroeconomic
signals on board as well, you don't have a convincing case that
risk-loving trades in FX will make a comeback, at least in the
near term."
The euro <EUR=> was unchanged at $1.2920 by 1142 GMT,
pulling back from a session high of $1.2988 hit after the ZEW
survey. Helping to erase euro gains was a 1.5 percent slide in
European shares <> during a volatile session.
Analysts said the single European currency would remain on
the back foot, after it hit a 1-month low of $1.2888 on trading
platform EBS.
The single currency <EURJPY=R> traded 0.2 percent higher at
126.80 yen, but hovered near 126.10 yen, a 1-month low touched
earlier in the day according to electronic trading platform EBS.
The dollar was up 0.2 percent at 98.15 yen <JPY=>, up from a
three-week low of 97.66 yen hit on Monday.
STRONG ZEW
The ZEW economic thinktank's monthly poll of German economic
sentiment rose to 13.0 from -3.5 in March. It was the first time
since July 2007 that the headline index was in positive
territory, and beat forecasts for a reading of 1.5.
"Today's ZEW index is good news. However, there is no reason
to become overly enthusiastic," said Carsten Brzeski, economist
at ING Financial Markets.
"Nevertheless, there are some glimmers of hope...The
deterioration of the real economy is slowing down and mixed
signals from confidence indicators show that at least confidence
is trying to find a bottom."
The euro will likely remain under pressure by uncertainty
over what unconventional policy steps the European Central Bank
may adopt next month. It is expected to cut interest rates below
their current 1.25 percent.
Focus will also remain on banks as players await the outcome
of stress tests by U.S. authorities to determine how well
lenders would fare if the recession proved deeper and longer
than expected. Results are expected on May 4. []
The Swedish crown rose to around 11.16 per euro from around
11.25 crowns after Sweden's Riksbank cut rates by a
smaller-than-expected 50 basis points.
The Riksbank said the repo rate was expected to remain at a
low level until the beginning of 2011. It also said there was
some probability of further cuts and of resorting to "other
measures" should the economy deteriorate more than expected.
The Bank of Canada will also announce its rate decision
later in the day, where it is expected to hold interest rates at
a historic low of 0.5 percent but unveil a list of other
possible steps to stimulate the economy [].
(Additional reporting by Tamawa Desai, editing by Chris Pizzey)
