* Euro falls; dollar index hits one-month high
* Stocks down on bank worries, hitting risk appetite
* UK bank shake-up stings sterling; Aussie down after RBA
* Federal Reserve's rate announcement on Wednesday awaited
(Adds quotes, updates prices, changes byline, changes dateline,
previous LONDON)
By Wanfeng Zhou
NEW YORK, Nov 3 (Reuters) - The U.S. dollar rose to a
one-month high against a basket of currencies on Tuesday as
concerns about the global banking sector and weaker equity
markets boosted the greenback's safe-haven appeal.
European shares fell and U.S. stock futures signaled a
lower open after disappointing results from UBS <UBSN.VS> and a
shake-up of UK banks Lloyds <LLOY.L> and Royal Bank of Scotland
<RBS.L> prompted investors to cut back on risk.
"We saw investors focus once again on the health of the
banking sector and that of course has tended to undermine
riskier assets," said Omer Esiner, senior market analyst at
Travelex Global Business Payments in Washington.
"Stocks were generally lower and that has rekindled demand
for safe-haven, low-yielding assets like the dollar and the
Japanese yen," he added.
In early New York trading, the ICE Futures U.S. dollar
index <.DXY>, a measure of the greenback's value against a
basket of six major currencies, rose 0.6 percent to 76.728,
after earlier climbing as high as 76.817, its highest level
since early October.
The euro fell about a full percent on the day, hitting a
four-week low of $1.4627 <EUR=>, according to Reuters data and
reversing Monday's gains made on firm manufacturing data.
Some attributed losses in banks shares and the euro partly
to European Commission estimates of bank losses renewing
anxiety over the sector's health.
The EU Commission quoted results of stress tests in the
banking sector, published in early October, which said losses
could amount to 400 billion euros ($585.2 billion) in
2009-2010.
The euro fell 0.9 percent <EURJPY=R> to 132.14 yen while
the dollar dropped 0.1 percent against to 90.23 yen <JPY=>.
Some traders said profit-taking on risk assets, already
seen in equities, could materialize ahead of funds'
book-closings as the year-end approaches, and that this may
offer an additional boost to the dollar.
"Year-end position liquidation could also prove disruptive
to capital markets as investors crystallize this year's gains,"
said Geoffrey Yu, currency strategist at UBS in London.
WARY AHEAD OF FED, JOBS REPORT
Traders remained wary ahead of big scheduled events this
week. The U.S. Federal Reserve starts a two-day policy-setting
meeting on Tuesday and the European Central Bank and the Bank
of England also hold policy meetings later in the week.
[] [] Key U.S. jobs data is due on Friday.
The Fed, which will announce its decision on Wednesday, is
expected to keep its benchmark interest rate unchanged near
zero. Investors will focus on the interest rate outlook, but
many analysts say the Fed is unlikely to change the wording of
its pledge to keep rates low for an "extended period". []
"The banking system is still very soft globally. I don't
think the Fed is going to be in a big hurry to do anything
about interest rates going forward and certainly in their
language I don't expect any changes," said Andrew Busch, global
FX strategist at BMO Capital Markets in Chicago.
The Australian dollar fell 0.9 percent against the U.S.
dollar to US$0.8954 <AUD=D4>, extending losses after the
Reserve Bank of Australia raised its cash rate for the second
month running as expected, but left markets guessing if it
would raise rates again as soon as December. []
Markets were still pricing in the chance of a 25 basis
point increase in December, albeit a reduced chance.
Sterling tumbled to a one-week low against the dollar after
the UK Treasury announced a shake-up of British banks, which
raised concerns about the financial sector. The pound was last
down 0.5 percent at $1.6298 <GBP=>.
(Additional reporting by Naomi Tajitsu in London)
(Editing by Theodore d'Afflisio)
