* Yen softens, dollar index down 0.2 pct at 79.981 <.DXY>
* Sentiment recovers as stocks gain but wary before earnings
* Euro pares gains after weak German ZEW sentiment data
* Goldman Sachs results, U.S. retail sales/PPI data eyed
(Updates prices, changes byline)
By Jessica Mortimer
LONDON, July 14 (Reuters) - The dollar and the yen softened
on Tuesday as gains in equities and oil prices, coupled with
hopes for improved U.S. corporate earnings, encouraged investors
to take on more risk.
This boosted perceived higher risk currencies such as the
Australian dollar and sterling, which gained an additional lift
from better-than-expected economic data from those regions.
The euro was steady against the dollar, however, as a
weaker-than-expected German data dented hopes for a euro zone
economic recovery and caused the single currency to pare back
gains.
Market participants were also cautious about chasing prices
actively ahead of key earnings reports from Goldman Sachs
<GS.N>, as well as U.S. retail sales and producer prices data at
1230 GMT.
"The predominant effect on currencies is from higher stocks,
which is reflective of greater risk appetite due to hopes of
decent banking sector results," Investec economist David Page
said.
"There is an incredible correlation between asset classes at
the moment," he said, also noting a rise in oil prices back
above $60 per barrel <CLc1>.
A broad dip in the yen and the dollar came as European
stocks rose 0.9 percent <> and U.S. S&P 500 futures <SPc1>
also pointed to a firmer start on Wall Street.
At 1056 GMT, the dollar rose by 0.1 percent against the yen
to 93.02 yen <JPY=>, comfortably above a five-month low of 91.73
yen hit on electronic trading platform EBS on Monday.
The euro also rose 0.1 percent against the yen to 130.08 yen
<EURJPY=R>.
Against a basket of currencies, the dollar fell by 0.2
percent to 79.981, as measured by the dollar index <.DXY>.
After Goldman results on Tuesday, results from major U.S.
financial companies Bank of America Corp, <BAC.N> JPMorgan,
<JPM.N> and Citigroup <C.N> are due later in the week.
Aside from U.S. corporate earnings, markets players will
keep an eye on U.S. data. Analysts expect PPI will show a 0.9
percent rise compared with a 0.2 percent climb in May. Retail
sales are expected to gain 0.4 percent after a 0.5 percent rise
in May.
WEAK ZEW
The euro was steady against the dollar at $1.3977 <EUR=>,
staying stubbornly below the $1.40 mark and off an earlier
session high of $1.4015.
The euro dipped after the German ZEW economic think tank's
monthly poll of economic sentiment fell to 39.5 from 44.8 in
June. This was far lower than market forecasts for a reading of
47.8, and the first setback for the index since October 2008.
[]
"The stabilisation of the German economy is underway but it
will not be as strong as latest data could make us believe,"
said Carsten Brzeski, economist at ING Financial Markets.
Separate data showed industrial production in the 16-country
euro area gained 0.5 percent on the month but fell 17.0 percent
year-on-year. The monthly rise, although lower than forecasts
for 1.2 percent, was the first since August 2008.
[].
Among perceived higher risk currencies, the Australian
dollar rose 0.8 percent to $0.7890 <AUD=> and sterling gained
0.5 percent to $1.6315 <GBP=D4>.
The two currencies were buoyed both by rising risk appetite
and by firmer-than-expected data, including Australian business
confidence data [] and UK surveys on retail sales
and house prices [].
Further UK data showed inflation falling below the Bank of
England's 2 percent target in June, though this was in line with
forecasts. []
Elsewhere, markets will be looking ahead to a Bank of Japan
policy decision on Wednesday. The BOJ starts a two-day policy
board meeting on Tuesday and may announce that it will extend
measures to support corporate finance, while keeping rates
unchanged at 0.1 percent. [].
(Additional reporting by Tamawa Desai in London; Editing by
Victoria Main)
