The euro was slightly weaker, falling below 1.38 usd, after a slightly softer-than expected French business sentiment survey and with the latest bout of risk aversion giving some rare support to the dollar. A composite indicator of French business confidence was 110 in July, unchanged from June, according to a monthly survey of industrialists carried out by the statistics office Insee. While the headline figure was in line with expectations, the general output expectations measure fell to +17 from +24, -- economists had expected a smaller fall to +21. Meanwhile signs of risk-aversion spreading from the credit markets linked to the trouble US subprime sector are beginning to emerge with falls in major equity markets and a firmer yen. Steve Pearson at HBOS said that the spread of risk aversion to global financial markets will actually give the dollar, which has so far felt the brunt of the subprime concerns, a boost. "In an environment of sustained cross market re-pricing of risk there are likely to be important dollar positive offsets some foreign capital will probably be diverted to US Treasuries from US corporate bonds, and the recent huge outflows of US domestic capital to emerging markets will abate," he said. "We look for dollar weakness to reverse abruptly should cross market contagion broaden and deepen," he added. However this afternoon's key US data - existing home sales for June - could well send the dollar back down. The numbers will be watched closely given the ongoing concern about the US housing market and problems with sub-prime mortgages, and if they come in weak then the dollar is likely to fall back firmly. Also out this afternoon in the US are weekly mortgage application figures and the Beige book. Elsewhere, the pound was steady, gaining some support from the news that UK Chancellor of the Exchequer Alistair Darling is set to give a green light today to more takeovers of big-name British businesses by acquisitive multi-billion-dollar funds controlled by foreign governments. This is supportive of the pound since the funds would need to buy sterling in order to fund this acquisitions. However the UK currency has fallen away from the fresh 26-year high it set against the dollar yesterday morning, and analysts are questioning whether it has now lost its upward momentum, with risk aversion beginning to weigh on high-yielding currencies. "Given that equity market jitters are emanating from the US credit side, the pound faces downside risks as UK investors have been heavy buyers of US corporate bonds," said analysts at BNP Paribas. Finally the New Zealand dollar was up ahead of the country's interest rate decision later tonight. The Reserve Bank of New Zealand believe their currency's exchange rate is significantly overpriced but may still raise rates in a bid to cool the country's booming economy. "The medicine necessary to cure the threat of excessive growth will likely deliver the unpleasant side-effect of additional kiwi dollar strength," said Daragh Maher, currency strategist at Calyon. "For now, the latter would seem to be the lesser of two evils for policy makers, but with each hike the trade-off between the two becomes more close-cut," he added.