* Dollar index hits 2-week low, risk demand picks up
* Euro up 0.7 pct at $1.4077 <EUR=>, highest since July 2
* Stocks boosted after strong Goldman, Intel earnings
* Eyes on U.S. consumer prices, industrial output
(Adds comments, updates prices)
By Tamawa Desai
LONDON, July 15 (Reuters) - The dollar fell on Wednesday,
hitting a two-week low against a basket of currencies, as other
currencies seen as higher risk benefited from upbeat earnings
from Goldman Sachs and Intel the previous day.
The yen also struggled while the euro gained, boosted by
higher European shares <>. The euro brushed off a 0.1
percent annual fall in euro zone inflation, which confirmed that
price risks in the region are nil at the moment.
But further gains were tempered ahead of U.S. economic data
including U.S. consumer prices, and industrial production and
capital utilisation data for June due out later in the day.
By 1105 GMT, the euro <EUR=> was up 0.7 percent at $1.4074,
near the day's high around $1.4083, the highest since July 2.
The dollar index fell to a two-week low of 79.527 <.DXY>.
Minutes from the U.S. Federal Reserve's latest policy
meeting will also be released, with market players focusing on
whether there was any discussion for a further expansion of
quantitative easing.
Analysts said risk appetite was rising on speculation other
U.S. firms may post solid second-quarter performance after
reports from the two U.S. powerhouse firms exceeded forecasts.
"The market may be expecting more pleasant surprises rather
than unpleasant surprises from earnings," said Steve Barrow,
head of G10 currency research at Standard Bank in London.
JPMorgan Chase & Co <JPM.N> will announce its results on
Thursday, followed by Bank of America Corp <BAC.N> and Citigroup
Inc <C.N> on Friday [].
VOLATILITY FALLS
One-month euro/dollar implied volatility fell to around 11.0
percent <EUR1MO=> according to Reuters data, its lowest since
Lehman Brothers collapsed last September, and down roughly half
since the start of the year.
"Euro continues to display less volatility versus dollar
than other risk currencies such as Australian dollar, New
Zealand dollar and Canada dollar," said Ashraf Laidi, chief
market strategist at CMC Markets.
"Recent bouts of risk aversion failed to drag the euro below
$1.38, while any rebound in appetite is unlikely to see the pair
regain the $1.4120s, especially during the mine-laden earnings
season."
Barrow at Standard Bank said volatility was unlikely to fall
further, given liquidity remained nowhere near levels seen
before the financial crisis escalated last year. This may help
to limit demand for carry trades, which tend to pick up in
low-volatility conditions, he added.
The euro <EURJPY=R> rose 0.7 percent to 131.60 yen, while
sterling and the Australian dollar each rose roughly half
percent against the yen.
Reaction was muted to the Bank of Japan's expected move to
extend special corporate finance-support measures by three
months, although some were surprised the extension was not
longer. It kept interest rates on hold as expected.[]
Antje Praefke, currency strategist at Commerzbank in
Frankfurt, said there was a risk that euro bond redemptions may
limit gains in euro pairs, including euro/yen, in the near term.
Roughly 60 billion euros of bond redemptions and coupon
payments are scheduled this week of which around 36 billion
euros are due on Wednesday.
"If funds from those redemptions go back into euro assets,
it won't be an issue, but if for example some of it goes back to
Japan, euro/yen may fall," she said.
Data on Wednesday showed China's currency reserves rose to a
higher-than-expected $2.13 trillion last month.[]
The yuan edged up to a two-week closing high as the dollar
retreated broadly. Spot yuan <CNY=CFXS> closed at 6.8316 against
the dollar on Wednesday, the highest close since July 2.
(Additional reporting by Naomi Tajitsu; editing by Stephen
Nisbet/Ron Askew)
