* Investors in risk-seeking mode as global stocks rise
* Diversification talk keeps dollar on back foot
* Euro breaks above $1.45, highest since December
(Recasts, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, Sept 8 (Reuters) - The U.S. dollar on Tuesday
sank to its lowest level against the euro this year as volume
returned after a summer lull and traders sold the currency amid
a rosy global outlook.
Analysts said the dollar could resume seasonal declines as
liquidity increases after a brief period in which the greenback
rose following upbeat economic indicators.
The U.S. currency, seen as a safe haven in times of
uncertainty and financial distress, tends to fall when
investors' risk appetite increases.
Further weighing on the dollar were renewed concerns about
the status of the greenback as the world's reserve currency
sparked by a United Nations agency report on Monday and news
out of China expressing concern about printing money to fund
Treasury purchases. For the UN report, click on
[].
"The dollar has been beaten down by several news headlines
-- with the UN report and the China news," said Jacob Oubina,
currency strategist, at Forex.com in Bedminster, New Jersey.
Britain's Telegraph newspaper over the weekend reported
that China was concerned about the Federal Reserve's policy of
printing money to buy Treasury debt, which could threaten to
set off a serious decline of the dollar and compel China to
redesign its foreign reserves policy.
The report quoted a top member of the Communist hierarchy,
Cheng Siwei, former vice-chairman of the Standing Committee and
now head of China's green energy drive.
"All these things are dollar-negative. This is a reminder
that the U.S. dollar is poised for some weakness in the months
ahead," Oubina said.
In addition, the euro's <EUR=> push above $1.45 should pave
the way for significant gains. The euro rose as high as
$1.4535, the highest since December 2008.
In late afternoon trading, the euro last traded 1.2 percent
higher at $1.4508.
NEXT TARGET FOR EURO/DOLLAR
HSBC said in a research note "the increased participation
and liquidity (as summer trading ended) would theoretically
increase the chances that the latest rise in euro/dollar can be
extended."
HSBC said the euro's next upside target is $1.4720, a
breach of which should propel the unit to its highest in nearly
a year.
Against a basket of major currencies, the dollar slumped to
its lowest in nearly a year. The ICE Futures' dollar index
<.DXY>, which measures the value of the greenback against a
basket of six currencies, fell to 77.047 -- its lowest since
late September 2008. The index was last at 77.3064, down 0.9
percent.
"As we enter the first trading day after the summer,
investors are decisively in risk-seeking mode," said Camilla
Sutton, a currency strategist at Scotia Capital in Toronto.
Over the past two decades, September has been the second
weakest month of the year for the dollar against the euro, with
December being the weakest, according to data compiled by RBS
Global Banking and Markets.
"Today's price action may likely be the beginning of the
next leg lower on the dollar," said Scotia Capital's Sutton.
"It all started when gold led the move higher in commodities,
and as it broke the key $1,000 level it helped push the dollar
even lower."
Gold earlier jumped to $1,007.45 an ounce <XAU=>, its
highest since March 2008. It was last trading at $993.70. The
yellow metal tends to track moves in the U.S. dollar inversely,
as it can be bought as an alternative asset to the greenback.
It is also cheaper for non-U.S. investors to buy gold if the
dollar falls.
U.S. crude futures also rose sharply on the New York
Mercantile Exchange and traded above $71 a barrel <CLc1>.
Sterling, meanwhile, rose to $1.6587, its highest in two
weeks against the dollar, spurred by a bigger-than-expected
increase in UK industrial production. [] It was
last up 0.9 percent at $1.6488 <GBP=>.
