* Euro/dollar hits six-month low
* Euro zone economic woes push dollar index to 2008 high
* Sterling slides to 2-yr low vs dollar
(Recasts with updated prices and comment, changes dateline,
previous LONDON)
NEW YORK, Aug 26 (Reuters) - The dollar rose to a six-month
high against the euro on Tuesday as the single currency tumbled
on weak German GDP data which raised concerns of recession in
the euro zone and fueled expectations of interest rate cuts.
Adding to the euro's woes, the Ifo German business climate
index in August fell more than expected to a three-year low.
[].
The dollar extended its rally of the past month, touching
a 2008 high against a basket of currencies on the view that
economic weakness, once thought to be limited to the United
States, is spreading globally.
"The German number suggests that the risk of a full-blown
recession in Germany is rising as the last time the number
plunged to this level, Germany was in recession," said Dustin
Reid, director, G11 FX Strategy at ABN AMRO in Chicago.
In early New York trade, the euro <EUR=> was down 1.1
percent at $1.4595 after falling to a low of $1.4570 after the
Ifo data, its weakest since mid-February.
The euro is down more than 6 percent this month and looking
set for the biggest monthly fall since its 1999 launch, on the
growing view that a weak euro zone economy will prompt the
European Central Bank to cut rates despite high inflation.
German GDP contracted in the second quarter for the first
time since 2004, while German consumer sentiment worsened more
than expected, hitting a five-year low [].
"Right after the ECB rate hike in July, Germany may be
falling into recession instead," said Holger Schmieding,
economist at Bank of America in London.
"With Spain turning down, Italy struggling, and France
losing a lot of momentum too, a serious German downturn would
not bode well for the euro zone as a whole as well, to put it
mildly."
DOLLAR SOARS
The dollar index <.DXY> rose to the year's high of 77.619,
helped also by a 0.9 percent rise in the U.S. currency to
1.1058 Swiss francs <CHF=> as other currencies tracked the euro
lower.
The pound fell to its lowest in over two years against the
dollar to trade as low as $1.8331 <GBP=>.
The dollar was up 0.3 percent at 109.62 yen <JPY=>.
Ongoing worries that other countries are vulnerable to U.S.
economic weakness and jitters about the health of the financial
services industry prompted investors to bail out of risky
trades in higher-yielding currencies, pushing the Australian
dollar <AUD=> to an 11-month low of $0.8495.
High-yielding currencies tend to suffer when risk aversion
increases as investors exit trades where they use low-yielding
currencies to fund purchases of these assets.
The New Zealand dollar fell to within a cent of a one-year
low of $0.6818 hit earlier in the month. The currency fell
under selling pressure earlier in the day, when New Zealand
posted its highest monthly trade deficit in 11 months in July.
A slew of U.S. housing data is slated for release on
Tuesday. Indicators due include S&P Case Shiller survey of home
prices for June, a report on new homes sales in July, consumer
confidence for August and the release of the minutes of the
last FOMC meeting. For details, see [].
(Reporting by Nick Olivari, additional reporting by Naomi
Tajitsu in London, Editing by Chizu Nomiyama,)
