By Vicki Schmelzer

NEW YORK, Sept 15 (MNI) - Financial market spirits were far more elevated this week than they were a year ago on September 15, 2008, the day Lehman Brothers declared bankruptcy.

The S&P 500 closed up 0.31% at 1052.63 Tuesday after posting a new 2009 high of 1056.00 earlier.

On September 15 last year, the S&P closed down 4.71% to end the day a new 2008 low of 1192.80.

Renewed risk appetite continued to keep the dollar on the defensive in September 2009, with global investors continuing to take sidelined monies out of money market accounts to reinvest abroad.

The polar opposite was mostly true in September 2008, when the dollar was being increasingly being underpinned by safe-haven demand.

Dollar-yen closed at Y104.53, sterling at $1.7995 and the euro at $1.4264 on September 15, 2008.

On Tuesday, dollar-yen stood at Y91.10, cable at $1.6498 and the euro at $1.4667.

The CBOE's VIX index closed around 31.70 last year, versus current levels around 23.42.

The front NYMEX light sweet crude oil futures contract settled at $95.71 per barrel on September 15, 2008 vs. Tuesday's settlement at $70.93 (up $2.07 on the day).

Risk appetite sentiment was evident in a wide array of instruments, from demand for stocks and commodities to a tsunami of new corporate issuance.

Market players appeared to shrug off comments by Federal Reserve Vice Chairman Ben Bernanke, who gave a fairly gloomy outlook for job growth Tuesday -- a week ahead of a Federal Open Market Committee two-day meeting on monetary policy.

Bernanke warned that it may take a good while to bring the unemployment rate down from high levels (9.7% in August), given the likely prospect of nothing more than "moderate" growth as he responded to questions following a speech at the Brookings Institution.

Instead, market players seemed to take comfort from a steady stream of upbeat U.S. data.

August retail sales data, released earlier Tuesday, showed a larger-than-expected increase of 2.7% (+2.0% consensus), with ex-autos rising 1.1%, well above consensus of +0.4%.

"The 2.7% retail jump, boosted by a 10.6% rise in a 'cash-for-clunkers' auto sales, was unusually impressive because while consumers were busy shopping for cars, they apparently had time to shop for other things too," said Ian Morris, economist at HSBC.

"Hence, the ex-auto jump of 1.1% (0.4% expected) and ex-auto/gas jump of +0.6% (flat expected), suggests that maybe, just maybe, the multiplier effect from fiscal stimuli is starting to work its magic," he said.

Market players also cheered the New York Empire State manufacturing index, which rose to 18.88% in September versus 12.08% in August and consensus at 15.0%.

"A lot of the many doubts about incoming numbers are starting to fade," said Michael Woolfolk, senior currency strategist at Bank of New York Mellon.

The market was no longer trying to assess when the U.S. economy would hit bottom, he said.

"Now, they're trying to find out how soon we will see sustainable growth again," Woolfolk said.

In the past, improved risk appetite has meant dollar selling and a rise in U.S. equities, but this link has been severed on more than one occasion recently, he noted.

The market has seen "glimmers of a breakdown of the correlation between the dollar and the Dow," Woolfolk said.

"For the negative correlation (dollar down/stocks up and vice versa) to turn to a positive correlation (dollar up/stocks up and vice versa) would be consistent with the historical norm," he said.

However, with the Fed expected to be on hold for months to come, the euro could edge up toward $1.5000 into year-end.

"The euro will creep higher until the Fed makes it clear it will normalize rates," Woolfolk said.

"We could see $1.60, if the Fed delays" (normalizing rates) beyond January/March 2010, Woolfolk said.

Euro-dollar closed at $1.4667 Tuesday, down from the new 2009 high of $1.4686 posted earlier and up from an earlier low of $1.4560.

Market players continued to target a retest of $1.4720, the December 18 peak, in the short-term, traders said.

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