* U.S. dollar index recovers
* Global growth concerns support dollar
* Euro, yen fall against dollar
(Updates prices, adds comment)
By Gertrude Chavez-Dreyfuss
NEW YORK, Aug 20 (Reuters) - The U.S. dollar rebounded on
Wednesday, still bolstered by a growing view that the United
States could skirt a possible recession even as other major
countries grappled with their own decelerating economies.
The dollar index <.DXY> firmed on the ICE Futures Exchange
after retreating much of the New York session on Tuesday as
investors took profits following a 2008 high hit earlier that
day on global markets.
Traders resumed buying the currency on Wednesday on what
was seen as consolidation in the absence of fresh market-moving
news, economic data or policymakers' speeches.
"We are seeing a modest consolidation of recent dollar
gains, but the consolidation appears shallow because the dollar
is gaining despite disappointing data in the past few days and
concerns about the financial sector," said Michael Woolfolk,
senior currency strategist, at Bank of New York Mellon.
"Overall, I believe the dollar rally is very much alive and
well. In terms of growth and interest rate differentials, the
dollar is poised for further gains," he added.
In midday New York trading, the dollar index, a measure of
its value against a basket of six major currencies, was up 0.6
percent on the day at 77.169.
On Tuesday, it rose to a high for the year of 77.413.
The euro was down 0.7 percent at $1.4684 <EUR=>, well
within striking distance of its six-month low of around $1.4631
hit on Tuesday.
The dollar gained 0.3 percent on the yen to 110.00 yen
<JPY=>, not far from its seven-month high of about 110.67 yen
hit last week.
Oil, meanwhile, resumed its downtrend, further underpinning
the dollar. U.S. crude future fell more than 1 percent to
$113.11 per barrel <CLc1> after U.S. crude oil inventories
surged last week.
HEADWINDS FOR U.S. DOLLAR
In the last few days, some analysts said the risks to both
the U.S. and global economy appeared to be more balanced than
they had been in recent weeks, when a sharp deterioration in
the outlook for other countries gave the dollar a strong lift.
Market participants cited ongoing troubles at U.S. agencies
Fannie Mae <FNM.N> and Freddie Mac <FRE.N>, which may need a
government bailout, along with the prospect of further
write-downs at Lehman Brothers <LEH.N>.
While interest rate expectations and differentials have
shifted sharply in the dollar's favor, the absence of further
clues from data or policy-makers gives less scope for that move
to continue.
Futures markets no longer expect the European Central Bank
to raise rates this year; half percentage point U.K. rate cuts
over the next six months are almost fully discounted; and more
aggressive Reserve Bank of Australia easing is already factored
in.
"While growth momentum appears to be slowing globally,
accounting for part of the recent reversal in the dollar, the
U.S. financial sector remains the primary source of global
uncertainty," wrote Bob Sinche, global head of rate and FX
strategy at Bank of America in New York.
"While the dollar has not always tracked movements in
financial stock index prices over recent years, changes in
expectations about the health of the financial industry ...
have guided general dollar performance versus major currencies
since signs of financial stress began about a year ago," he
added.
Still other analysts remained upbeat on the dollar, with
some of them saying that the U.S. economic picture and banking
sector have improved since the beginning of the year.
"Longer-term, we are starting to see the seeds of more
structural improvement in U.S. external imbalances, and this is
the key reason why we have a dollar appreciation trend in the
forecast looking 12 months ahead," said Goldman Sachs in a
research note on Wednesday.
(Editing by Kenneth Barry)
