The dollar paused on Tuesday after a steep rally in the previous session as investors waited to see if forthcoming data would reinforce the Federal Reserve's optimism in the U.S. recovery. The dollar enjoyed a broad-based rebound on Monday as easing oil prices and upbeat comments on the U.S. recovery from central bankers Robert McTeer and Ben Bernanke bolstered sentiment towards the flagging greenback. The U.S. currency extended gains in Asian trade -- hitting its highest in over two weeks against the euro and almost two months against sterling -- before slipping back to stand slightly lower on the day. "Investors reacted to the upbeat comments from the Fed yesterday but want to see if this optimism is backed up by data," said Ryan Shea, senior currency strategist at State Street in London. He added that, after recent weak data releases, U.S. indicators in the next few weeks would need to be very strong to convince the market the U.S. central bank would raise interest rates again in September. U.S. durable goods orders on Wednesday, second-quarter growth data on Friday and the August payrolls report next week will also shed light on the health of the U.S. economy. By 1015 GMT, the dollar was fractionally weaker at $1.2148 per euro , having earlier notched $1.2120, its highest since August 6. The U.S. currency was steady against the yen at 109.85 .
ECONOMICS OF OIL
The latest run-up in oil prices to record highs just under $50 a barrel led some analysts to scale back their forecasts for U.S. economic growth. However, Fed officials appear less concerned. Dallas Fed President Robert McTeer said on Monday the U.S. recovery was "self-sustaining", a point echoed by Governor Ben Bernanke who said higher energy costs were unlikely to derail the recovery. Oil prices dipped below $46 a barrel on Tuesday, making a third day of falls as a more optimistic Iraq export picture eased recent supply worries. "The fall in oil prices is seen as positive for world growth and the dollar in particular, which is driving the moves in the last couple of sessions," said Mansoor Mohi-uddin, chief currency strategist at UBS in London. The euro was little moved by news German economic growth had been confirmed at an adjusted 0.5 percent quarter-on-quarter in the April-June period. The expansion was driven mainly by exports as domestic demand stagnated. Economists said the euro zone's largest economy was in danger of receding in coming months if domestic spending remains too weak to compensate for a likely slowdown in the global economy.///www..com Dollar