Dollar Near 5-Month High Versus Euro on Global Slowdown Concern

NEWYORK Jan. 21 -- The dollar traded near a five-month high against the euro as Asian stocks extended a slump in U.S. and European equities amid concern the global recovery will slow, spurring demand for safer investments.

The yen was close to the strongest in a month versus the 16-nation euro before U.S. reports today economists said will show manufacturing in the Philadelphia region and an index of U.S. leading indicators both rose at a slower pace. Demand for safety was supported on speculation U.S. banks reporting earnings today, including Goldman Sachs Group Inc., will fall short of analysts' estimates.

"People are beginning to cast doubts about the sustainability of a global recovery," said Akira Takei, a fund manager in Tokyo at Mizuho Asset Management Co., a unit of Japan's second-largest bank. "Carry trades may come to a halt, triggering buying back of funding currencies" such as the dollar and the yen.

The dollar was at $1.4122 per euro as of 9:31 a.m. in Tokyo from $1.4106 in New York yesterday when it rose to $1.4081, the strongest since Aug. 18. The yen traded at 128.88 per euro from 128.68, after rising yesterday to 128.41, the highest since Dec. 18. The dollar bought 91.26 yen from 91.24.

The Federal Reserve Bank of Philadelphia's general economic index fell to 18 in January from 22.5 the prior month, according to a Bloomberg survey before today's report. The Conference Board's measure of the outlook for the U.S. economy climbed 0.7 percent last month, down from 0.9 percent in November, according to a separate Bloomberg survey.

Stocks Decline

The MSCI Asia Pacific Index of shares dropped for a fourth day, losing 0.5 percent, after the Standard & Poor's 500 Index yesterday declined 1.1 percent.

IBM Corp. said yesterday fourth-quarter business-consulting revenue fell, and Morgan Stanley, the world's biggest brokerage, posted earnings that missed analysts' estimates. Companies reporting results today include Goldman, American Express Co. and Google Inc.

The New Zealand dollar rebounded from near a three-week low against the greenback after a government report showed retail sales gained more than economists forecast.

Retail sales gained 0.8 percent in November, compared with forecasts for a 0.5 percent gain. Core retail sales, which exclude car yards, fuel outlets and workshops, rose 0.8 percent.

"It's a very good result," said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. "We can be more confident the recovery is on a firm and sustainable path. The Reserve Bank of New Zealand will be hiking in April."

New Zealand's dollar traded at 72.22 U.S. cents from 72.17 cents in New York yesterday, when it weakened to 71.87 cents, the lowest since Dec. 30.

Dollar Index

The Dollar Index rose the most in six weeks yesterday amid speculation Chinese authorities will take further steps to clamp down on lending, slowing the expansion of the world's fastest- growing major economy.

China's economy grew 10.5 percent in the final three months of 2009, up from 8.9 percent in the prior three months, according to a Bloomberg survey before today's report. Signs growth is accelerating may spur the central bank to step up measures to avoid asset bubbles.

"We await Chinese numbers," analysts led by Hans-Guenter Redeker, London-based global head of foreign-exchange strategy at BNP Paribas SA, wrote in a research note today. "Very good ones will mean tightening is accelerating, which is read as putting downward pressure" on higher-yielding currencies.

The Dollar Index, which tracks the U.S. currency against those of six major trading partners, gained 1.1 percent yesterday to 78.359, the biggest advance since Dec. 4