* Dollar gains as stocks fall, risk aversion returns
* Euro drops, ECB's Weber comments on "non-standard" steps
* U.S. data reinforce worries about broader economy
(Updates prices, adds comments, details)
By Wanfeng Zhou
NEW YORK, April 15 (Reuters) - The U.S. dollar traded
stronger on Wednesday as falling stocks around the world and
persistent worries about the economy added to the greenback's
allure as a safe-haven currency.
The euro came under pressure after European Central Bank
Governing Council member Axel Weber said the ECB will announce
a package of "non-standard measures" to boost the euro-zone
economy in May.
Risk aversion returned to the markets after U.S. data
reinforced expectations that the economy contracted sharply in
the first quarter, while the chief executive of Wal-Mart Stores
Inc <WMT.N>, the world's largest retailer, said he still sees
no quick end to the recession.
The greenback has benefited from low risk appetite in
recent sessions as investors sought shelter in
dollar-denominated assets, such as U.S. Treasuries.
"Risk aversion remains the driver for the dollar," said
David Gilmore, a partner at FX Analytics in Essex, Connecticut.
"When we see evidence of weakness in the economy, it promotes
higher levels of risk aversion."
He said the dollar still has some upside potential as U.S.
stocks could pull back by another 10 percent to 15 percent
after their rally in March and other central banks, such as the
ECB adopt quantitative easing tools to boost growth.
In midday trade, the euro <EUR=> fell 0.6 percent to
$1.3173. It was down 0.2 percent against the yen at 130.87 yen
<EURJPY=>, after earlier slumping as low as 129.95 yen,
according to Reuters data.
Against the yen, the dollar <JPY=> rose 0.6 percent to
99.35 yen, well above session lows of 98.15 yen.
Concerns about the economy intensified after data showed
U.S. consumer prices posted their first 12-month drop in nearly
54 years in March and industrial production slipped further in
March. For details, see []
"We saw the first negative year-over-year (headline) print
in quite a long time. It reinforces the deflationary fears that
the Fed has been voicing," said George Davis, currency
strategist at RBC Capital Markets in Toronto. "I think it's
likely to continue seeing the dollar register some gains."
On a slightly brighter note, the New York Federal Reserve
Bank said manufacturing activity in New York state contracted
less severely in April than March's record tumble.
[]
ECB, STERLING
The ECB will lay out a package of alternative monetary
policy measures to boost the economy next month that will
stretch into next year, Weber said on Wednesday. He said the
measures will be valid for the rest of this year and into next
year. []
"Weber gives FX traders what they've been looking for,"
said Ashraf Laidi, chief market strategist at CMC Markets in
London, in a note. "Weber left no room for doubt by reasserting
inflation risks remained limited, which only further supports
the Bank's moves towards increased monetary stimulus."
Sterling was the standout performer, jumping to a high of
$1.5037 against the dollar <GBP=> as it surpassed the $1.50
mark for the first time in three months.
The British pound last traded up 0.6 percent at $1.4987.
The boost came after the UK's Royal Institution of
Chartered surveyors overnight reported that its house price
balance rose to -73.1 in March from -78.1 in February.
[]
Though still indicating sizable house price falls, the pace
of decline was the slowest in a year, providing some hope that
the UK housing market may be over the worst.
"The strong RICS survey overnight has boosted sterling. It
is higher than it was 12 months ago and people are seeing
tentative signs of green shoots in the UK housing markets,"
said State Street currency strategist Lee Ferridge.
