* Dollar touches 2-week high vs euro, 1-month high vs yen
* Oil price slump supports dollar
* U.S. housing bill improves confidence in financials
(Recasts; adds comments, changes byline)
By Vivianne Rodrigues
NEW YORK, July 23 (Reuters) - The dollar rallied to a
one-month peak against the yen and a two-week high against the
euro on Wednesday, supported by a further drop in oil prices
and improved confidence in the U.S. financial sector.
Oil prices, which are trading more than $20 below this
month's record peak <CLc1> of $147.27, continued their decline
on Wednesday following the release of U.S. crude inventory
data, giving the greenback a generally bid tone.
At the same time, the U.S. House of Representatives
prepared to vote on a measure that is expected to help the
housing sector recover from its worst downturn since the Great
Depression. The White House said President George W. Bush will
sign the bill into law.
"U.S. equities, oil prices and a little bit of hangover
from yesterday's hawkish Fed speak have kept the dollar
supported so far on Wednesday," said Ronald Simpson, managing
director of global currency analysis at Action Economics in
Tampa, Florida.
"Congress is planning on passing this housing bill today,
and the president said he was going to sign it," he added.
"While it's not a fix to the problem, it certainly is going to
allay some fears, at least for the short term."
In late afternoon trading in New York, the dollar climbed
to its highest level in a month at 107.97 yen <JPY=>, according
to Reuters data, before easing back to 107.88 yen, still up 0.4
percent.
The euro had fallen as low as $1.5671 <EUR=>, its weakest
level since July 9 and more than 3 U.S. cents below last week's
record high of $1.6037, according to Reuters Dealing. It last
traded at $1.5688, down 0.6 percent on the day.
Adding to the euro's downside was data showing euro zone
new industrial orders fell more sharply than expected.
The dollar rose to a one-month high of 1.0400 against the
safe-haven Swiss franc <CHF=>.
The greenback also continued to benefit from comments from
Philadelphia Federal Reserve President Charles Plosser, who
said on Tuesday that the U.S. central bank may have to raise
interest rates sooner rather than later to combat inflation.
The implied prospects for the Fed to increase benchmark
lending rates in September, to 2.25 percent from 2 percent, hit
68 percent, compared with 52 percent late on Tuesday and 26
percent a week ago. For details, see [].
BEIGE BOOK, MORE DATA AHEAD
A Federal Reserve survey of economic conditions showed that
price pressures were elevated or increasing across the United
States in recent weeks, even though the pace of economic growth
slowed. []
"All reporting districts characterized overall price
pressures as elevated on increasing," the Fed said in its Beige
Book report on the state of the economy through July 14.
"The Beige Book report reaffirms the stagflationary bias
occurring in both the inflation and growth categories and that
the Fed is likely to remain boxed in by the credit
environment," said Alan Ruskin, chief international strategist
at RBS Global Banking & Markets. "However, today the market
will continue to focus on oil, where price slippage is still
regarded as EUR/USD negative."
Analysts said more data on Thursday -- along with oil price
and equity developments -- would also be key in determining
whether the slide in euro/dollar lasts or soon gives way to
another try beyond $1.60.
U.S. existing home sales will vie for attention with German
Ifo business sentiment survey and euro zone flash PMI, market
watchers said.
"The combination of prolonged Ifo and PMI weakness could
further punish the single currency to as low as $1.5660,"
Ashraf Laidi, chief FX strategist at CMC Markets U.S. in New
York, said in a research note.
The biggest loser among the majors was the New Zealand
dollar, which slipped 1 percent to US$0.7512 <NZD=> after New
Zealand finance company Hanover Finance said it was suspending
repayments of existing loans and interest.
Analysts said there could be scope for a recovery, however,
if the Reserve Bank of New Zealand leaves rates on hold at 8.25
percent on Thursday, disappointing minority bets for a cut.
(Additional reporting by Wanfeng Zhou and Nick Olivari in New
York; Editing by Jonathan Oatis)
