By Dennis Pettit

NEW YORK, Sep 15 (MNI) - The dollar was nursing moderate losses vs. the euro but only slight losses vs. the yen as an afternoon burst of improved risk-appetite bolstered the euro, stocks and gold, propelling euro-dollar to fresh highs for 2009.

Euro-dollar was changing hands at $1.4672 in afternoon dealings Tuesday, in the upper reaches of the day's range that saw euro traverse $1.4561 to $1.4686, setting fresh lows for the day in morning trade, only to reverse higher with a stop-loss driven flurry above $1.4650 in afternoon dealings.

Dollar-yen meantime was changing hands at Y91.10 in afternoon dealings, this pair holding a more sedate Y90.83/91.65 range during the US session, and early burst of dollar buying vs yen seeing this pair lift to its best levels of the day early on, only to deflate steadily for much of the remainder of the session.

Fueling afternoon trading in both pairs was a modest rally in US stocks that saw the Dow Jones Industrial Average with gains of about 53 points.

Also on the rise, and signaling improved risk-appetite, traders pointed to a rally in gold which was changing hands at $1007.00 per oz in afternoon dealings after starting the day around $996.60.

In similar fashion, oil was holding heady gains of about $2.00 per barrel, trading near $71.00 and also signaling improved risk-appetite, traders said.

With that backdrop, the dollar turned defensive, presenting traders with a chance to tackle recent euro-dollar 2009 highs at $1.4654 set just Friday, the euro able to vault that level in afternoon trading Tuesday and flush stop-loss driven buy orders on the way to $1.4686, its best level since last December.

Traders cite the December high at $1.4720 as a nearby target for euro-dollar.

U.S. economic data released Tuesday appeared to signal an improving outlook for the U.S. economy, with a strong retail sales picture eventually providing a boost to stocks that, ironically, undercut the greenback vs. the euro.

August retail sales rose 2.7% vs. 2.0% expected with ex-motor vehicle sales up 1.1% vs. +0.4% expected, with motor vehicle sales up 10.6% and gasoline station sales up5.1%.

Sales ex. motor vehicle and gas rose 0.6 vs. down 0.4% in July, with gains in every component except furniture (-1.6%) and building materials (-1.2%).

The August sales rise was the largest since January 2006, while the motor vehicle sales rise was the largest since October of 2001.

The August producer price index rose 1.7% and core rose 0.2% (+0.1743% unrounded) as energy rose 8% on gains across categories.

Year-on-year PPI is down 4.3% overall but up 2.3% core, still modest.

Food prices rose 0.4% on gains in eggs, cheese and fruits. Core was boosted by light trucks +0.8% (accounts for half the core gain), cars +0.7%, communications equipment +0.3% and pharmaceuticals +0.2%.

Do not expect the Aug surge in PPI to move into CPI, as Cash for Clunkers lowered auto prices and should offset the energy gain.

July business inventories fell 1.0% vs -0.9% expected.

A Market News International calculation shows business inventories ex. retail autos down 0.9% vs -1.3% in June. Business sales up only 0.1% in July, pulling the inventory/sales ratio down to 1.36 vs. 1.38 in June, the lowest since October 2008.

The September New York Fed Empire State survey index rose to 18.88 vs 12.08 in August.

Summaries:

EURO SUMMARY: Opened at $1.4601 after $1.4579/1.4646 overnight range.

-- Euro had lifted off morning lows before stalling shy of $1.4620 and returning to orbit $1.4600 as cable stole the spotlight. Upbeat retail sales data from the US gave euro a brief lift on improved risk-appetite though the pair stalled at $1.4625 and turned quickly south as talk emerged of semi-official sales, euro then wasting little time in testing for stops under the overnight low on a probe to $1.4560 area of a large expiring strike. Low at $1.4561 kept the expiry intact and a rebound saw $1.4610 and trade at $1.4590 around the cut. Late morning into afternoon saw euro find a base at $1.4580 with upward drift to $1.4620 by early afternoon as US stocks built slight gains, the euro then extending steadily before a spike above $1.4650 signaled a round of stops firing off, momentum carrying euro to a new 2009 high at $1.4686. Euro deflated modestly in later trade but held near $1.4670 in late action.

YEN SUMMARY: Opened at Y91.17/133.10 after Y90.79/91.27 and Y132.79/133.38 overnight ranges.

-- Yen longs had been squeezed overnight though pressure was relatively modest as dollar gains were held to Y91.27 and yen remained defensive in early trade before a heavier wake of selling in the wake of the morning US data that inspired fresh risk-building. Dollar vaulted Y91.50 area of reported heavy supply for trade to Y91.65 as stops were flushed, euro-yen lifting to Y133.79 before both quickly reversed. Dollar retreated to Y91.25 by the option expiry while euro-yen slid to Y132.90 as longs bailed, with dollar losses extending to Y90.90 by midday as euro-yen orbited Y133.00. A brief lift stalled at Y91.10 but a subsequent dip pulled up shy of Y90.80, the dollar returning to Y91.00 for afternoon trade as euro lift propelled euro-yen to Y133.55 for an afternoon high. Late trade saw the dollar at Y91.05 as euro-yen held Y133.55.

Dollar Rates in New York Trade:

Eur-Dlr Dlr-Yen Eur-Yen Stg-Dlr Dlr-Swiss 3:30 p.m. Tue 1.4672 91.05 133.58 1.6500 1.0340 2:49 p.m. 1.4659 91.08 133.52 1.6488 1.0350 1:36 p.m. 1.4635 90.98 133.16 1.6470 1.0370 11:38 a.m. 1.4605 91.17 133.14 1.6432 1.0383 10:02 a.m. 1.4585 91.30 133.14 1.6440 1.0398 7:28 a.m. Tue 1.4601 91.17 133.10 1.6470 1.0382 3:21 p.m. Mon 1.4609 90.99 132.93 1.6560 1.0355 7:18 a.m. Mon 1.4542 90.81 132.06 1.6534 1.0403 3:16 p.m. Fri 1.4582 90.65 132.18 1.6680 1.0375

-- email: dennis@marketnews.com, Tel: (212) 669-6436

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