* Dollar index down 0.2 pct at 79.646
* Moves exacerbated by month-end, quarter-end flows
* Stg hits 8-mth high vs dlr, trims gains after weak UK GDP
(adds quote, updates prices, adds details)
By Harpreet Bhal
LONDON, June 30 (Reuters) - The dollar weakened across the
board on Tuesday, supported by an easing in risk aversion after
gains in stock markets and oil prices reflected an upbeat view
on the prospects of global economic recovery.
Sterling hit an eight-month high against the dollar, while
the U.S. currency came under pressure against the Australian and
New Zealand dollars as share markets in Asia rose and U.S. stock
futures pointed to a positive Wall Street open.
Currency movements were also exacerbated by month-end and
quarter-end flows, analysts said.
"We came out of the Asian session with a relatively positive
stance on the world. The two things combined (the spike in oil
prices and rallying equity markets) did lead to a degree of
positive sentiment in the market," said Simon Derrick, head of
currency research at Bank of New York Mellon.
The expectation of global economic improvement gained
support from the CBOE Volatility Index <.VIX>, Wall Street's
so-called fear gauge, which dipped to its lowest level since
just before Lehman Brothers collapsed last September.
By 1038 GMT, the dollar index, which measures the dollar
against a basket of six currencies, was down 0.2 percent to
79.646 <.DXY>. The index is on track for its worst quarterly
performance since Q4 2004, down some 6.8 percent.
Sterling trimmed gains after weaker-than-expected UK gross
domestic product (GDP) figures suggested the economy would
continue to struggle. The pound <GDP=D4> fell to around $1.6588
as data showed the economy contracted 2.4 percent in the three
months to March, the biggest decline in 50 years.
The pound had earlier climbed to around $1.6745, the highest
since last October, according to Reuters data, after data showed
UK house prices rose for the second straight month in June.
The euro was up 0.4 percent at $1.4125 <EUR=> while the
dollar was down 0.3 percent against the yen at 95.80 yen <JPY=>.
The Australian dollar <AUD=> climbed 0.8 percent to $0.8130
while the New Zealand dollar <NZD=> rose 0.2 percent at $0.6510.
RECOVERY LOOMS
Stock markets have rallied since lows hit in March, boosting
views that the global economy could be on the road to recovery.
The MSCI global stocks index was on course for its best
quarter since its launch in 1988, up some 22.5 percent
<.MIWD00000PUS>, while oil hit an 8-month high of $73.38 a
barrel <CLc1>.
"Risk appetite is set to improve further in H2 2009 but as
with economic recovery, the improvement will be gradual and
prone to setbacks," analysts at Calyon said in a note.
Ratings agency Fitch said the global economy has probably
stopped shrinking and will slowly begin to recover during the
second half, echoing a similarly positive outlook from the
International Monetary Fund (IMF).
However, data on Tuesday showed money supply growth in the
euro zone still lagged. Growth of M3 slowed to 3.7 percent in
May from a year ago, from 4.9 in April and below forecasts of
4.6 percent. []
Loans to euro zone businesses and households grew at their
slowest pace on record in May, underscoring the need for a quick
impact from the European Central Bank's 442 billion euro
liquidity injection last week.
Euro zone consumer prices fell for the first time ever in
June, dropping 0.1 percent year-on-year. Declining prices may
help to boost consumer demand, which is key to restoring
economic growth.
(Additional reporting by Tamawa Desai, Editing by David Stamp)
