LONDON, April 29 - The dollar held a firmer footing against the euro on Tuesday, cheered by strong gains on Wall Street in the previous session and expectations of a rebound in U.S. consumer confidence data later in the day. Major U.S. stock indices rose almost two percent on Monday after solid results from blue chip companies. Futures markets pointed to more stock gains at Tuesday's open. But solid consumer sentiment figures are seen key to further dollar gains. The U.S. Conference Board's Consumer Confidence Index, due at 1400 GMT, is expected to show a recovery to 69.8 in April, from 62.5 in March. "Good corporate earnings news yesterday and expectations of a bounce back in today's U.S. consumer confidence number are helping the dollar," said Mitul Kotecha, global head of foreign exchange strategy at Credit Agricole Indosuez.
The dollar pushed to $1.0953 per euro by European mid-morning, more than a cent above Monday's lows which took the greenback within a whisker of last month's four-year low at $1.1084. Dealers said the market was keen to take profits on the euro after the single currency's failure to break that key chart barrier. The euro also pulled back from Monday's four-year high against the yen as encouraging news on SARS and a conditional offer from North Korea to end its nuclear programme offered the Japanese currency support.
CONFIDENCE KEY
The dollar's late Monday and early Tuesday gains were a departure from recent sessions, which have seen the greenback ignore equities gains. Traditionally a plus for the dollar, Wall Street's performance has been overshadowed more recently by worries over the health of the U.S. economy, leading investors to seek the certainty of higher yields in other currencies. Sluggish first quarter economic growth figures out of the U.S. last week did nothing to help dollar sentiment, but the market appears willing to forgive that in light of any data that may show a departure from weakness in the post-Iraq environment. "Today the key report is consumer confidence out of the Conference Board -- which the market thinks is looking to be a relatively strong report, with upside risk to consensus -- and the dollar can benefit somewhat from that," said Alex Patelis, senior currency strategist Merrill Lynch.
Other items being watched this week are the U.S. ISM manufacturing survey on Thursday and Friday's U.S. jobs report. U.S. Federal Reserve chief Alan Greenspan is also testifying before the House of Representatives Financial Services Committee on Wednesday. "It will be interesting to see what Alan Greenspan says tomorrow. That seems to be the testimony in which he could pave the way for a cut in interest rates -- if he was thinking along those lines," said Rob Hayward, senior currency strategist at ABN Amro.
YEN RECOVERS POISE
In thin trade due to a Japanese holiday, the euro fell a third of a percent to 131.88 yen . The dollar stood at 120.15 yen , a touch softer on the day but in the middle of this month's narrow trading range. Dealers were more upbeat on the Japanese currency after the World Health Organisation said on Monday that the deadly Severe Acute Respiratory Syndrome has peaked in Singapore, Hong Kong, Vietnam and Canada. While it had spread to Taiwan and was yet to be contained in China, the positive SARS news was seen as lifting some of the gloom over Asia's economic outlook. With the euro's failure to break higher on the yen on Monday, dealers saw this as a good signal to cut back a bit on some long positions in the single currency. "In Asia in general there seems to be some sort of relief that the spread of the SARS virus appears to have been contained," said Hayward, at ABN Amro.
"In euro/yen positions we saw a bit of selling overnight, probably exaggerated by the relatively thin conditions, but it it does seem to be the case that people are relatively long euro and relatively short yen." The North Korea nuclear offer was also positive for the yen, in that it could ease some security fears and improve the Asian investment environment, but details of the offer were unclear. North Korea proposed a plan that would "ultimately deal with" its nuclear capability and missile activities but wanted something major in return, U.S. Secretary of State Colin Powell said on Monday. He did not disclose what Pyongyang was seeking.//