* Euro hits six-month low vs dollar
* Euro zone economic woes push dollar index to 2008 high
* U.S. consumer confidence boosts dollar
(Updates prices, adds comment, changes byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Aug 26 (Reuters) - The dollar scaled six-month
peaks against the euro on Tuesday, lifted by a jump in U.S.
consumer confidence and expectations of interest rate cuts in
the euro zone following weak German data that heightened
concerns of a recession in the region.
The euro initially tumbled versus the dollar following a
barrage of data suggesting economic weakness has spread beyond
the United States. The Ifo German business climate index in
August fell more than expected to a three-year low, German GDP
contracted in the second quarter for the first time since 2004,
while German consumer sentiment hit a five-year low.
In contrast, U.S. consumer confidence jumped in August,
while sales of newly constructed U.S. single family homes in
July rose from a June pace that was the slowest in nearly 17
years. []. The reports fueled further dollar
buying.
"The dollar comeback is all about taking joy in the euro
data's failings. I still think long-term books will tend to
dampen any euro bounce in the next few days," said Alan Ruskin,
chief international strategist, at RBS Global Banking and
Markets in Greenwich. Connecticut.
In midday trading, the euro <EUR=> was down 0.6 percent at
$1.4664 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.
The overnight index swaps market, meanwhile, has priced in
about 46 basis points of rate cuts by the European Central Bank
over the next year, analysts said, and investors could move to
factor in 75 basis points of easing in the coming weeks. ECB
interest rates are currently at 4.25 percent.
The dollar index <.DXY> rose to the year's high of 77.619,
and last traded at 77.225, up about half a percent on the day.
The U.S. currency also rose 0.4 percent to 1.1002 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=>. It was last at
$1.8382, down 0.8 percent.
The dollar was also up 0.5 percent versus the yen at 109.91
<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 using higher-yielding currencies, pushing the Australian
dollar <AUD=> to an 11-month low of US$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 US$0.6818 hit earlier in the month <NZD=>. The currency
fell under selling pressure earlier in the day, when New
Zealand posted its highest monthly trade deficit in 11 months
in July.
Investor focus now turns to the release of the minutes of
the last FOMC meeting. [], although few analysts expect
fireworks from the Fed comments.
"Following the (Fed's) Jackson hole conference (last week),
the Fed minutes might look a bit stale," said Stephen Malyon,
senior currency strategist, at Scotia Capital in Toronto. "The
one insight they could provide is whether there was greater
disagreement over the decision to leave rates steady than
suggested by the sole Fisher dissent."
Dallas Fed President Richard Fisher voted against the
majority decision on Aug. 5 to hold the benchmark federal funds
rate at 2 percent.
(Additional reporting by Nick Olivari; Editing by Chizu
Nomiyama)
