* U.S. dollar falls as stock markets extend rally
* Euro vaults to 5-week high above $1.30
* G20 pledges more resources for emerging markets
* Focus on Fed, BOJ policy meetings this week
(Adds comments, updates prices, changes byline)
By Vivianne Rodrigues
NEW YORK, March 16 (Reuters) - The euro hit a five-week
high against the U.S. dollar on Monday as U.S. and European
stocks rallied for a fifth straight session, signaling
investors' willingness to take on more risk.
A rise in euro zone inflation last month also helped push
the euro above $1.30 for the first time since Feb. 10. A pledge
by the Group of 20 finance ministers during the weekend to
double the resources for helping emerging markets lifted
spirits as well.
European share indexes closed higher and Wall Street also
rallied, led by financial shares after recent comments from
some major banks that they had achieved strong starts to 2009.
"The continuation of a broader positive sentiment at the
start of the week is helping the euro," said Matthew Strauss, a
senior currency strategist at RBC Capital Markets in Toronto.
"But the jury is still out on whether we are seeing a dead cat
bounce or if the rally in the euro is sustainable."
In afternoon trading in New York, the euro was up 0.7
percent at $1.3013 <EUR=> after earlier hitting a $1.3070
session peak. Sterling gained 0.7 percent to $1.4104 <GBP=>,
raising in tandem with UK shares.
The dollar was 0.3 percent higher at 98.14 yen <JPY=>,
partly on demand from Japanese importers, though exporters'
selling capped dollar gains, traders said.
The greenback has rallied in recent months because
investors see it as the safest store of value at a time when
economies across the globe are contracting. Its role as a main
funding currency outside Europe also enhances its appeal.
When sentiment improves, though, investors feel more
confident buying stocks and other currencies, while pressure to
hoard dollars for funding needs eases.
FED WATCH
The dollar also was pressured after Treasury said
foreigners sold a record net $148.9 billion of U.S. securities
in January, stoking concern about the U.S. ability to finance
its current account deficit.
There were signs of more weakness in the economy as well.
The New York Federal Reserve's manufacturing index fell to yet
another record low in March while U.S. industrial production
tumbled in February. And in a taped U.S. television interview,
Fed Chairman Ben Bernanke said the recession could last most of
the year.
"The data this morning does not paint a particularly pretty
picture," said Bank of New York-Mellon strategist Michael
Woolfolk. "There are really no signs of life in the
manufacturing sector of this economy just now, but today,
sentiment is trumping fundamentals."
The Fed holds a policy meeting this week and markets are
waiting to see if it signals plans to buy long-dated Treasuries
in an attempt to keep interest rates low.
Britain's central bank has already bought gilts and the
Swiss National Bank intervened in currency markets last week to
weaken the Swiss franc to stave off deflation, a move analysts
say could be repeated.
The euro hit a 12-week high of 1.5447 francs on Monday and
was last up 0.4 percent at 1.5394 francs <EURCHF=>.
The Bank of Japan, which also meets this week, may boost
long-dated government bond purchases and is considering buying
banks' subordinated debt, according to Japan's Nikkei business
newspaper.
(Additional reporting by Steven C. Johnson; Editing by
Kenneth Barry)
