Dollar regains ground against rivals

Investors seek shelter in the greenback after a report on durable goods orders points to underlying weakness in the U.S. economy.

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LONDON (Reuters) -- The dollar gained Wednesday, recouping the week's losses as a less-than-upbeat U.S. durables report eroded risk appetite and prompted investors to seek shelter in the safe-haven currency.

U.S. durable goods orders surged in July. But a key measure of business demand -- non-defense capital goods, excluding aircraft -- fell in July, reminding investors the U.S. economy still faces huge challenges as it tries to emerge from deep recession.

That report, however, was tempered by data showing a jump in U.S. new home sales last month that fueled some mild selling in the dollar versus the euro. The 9.6% rise in home sales was the fastest pace since September.

Still, the dollar held its gains, with investors locking in previous profits in other currencies such as the euro and high-yielders such as the Australian and New Zealand dollars.

"The question is, are signs that the U.S. economy is starting to bottom good for the U.S. dollar or for other currencies?" said David Watt, senior currency strategist, at RBC Capital Markets in Toronto.

He added that Wednesday's profit-taking in other currencies could turn into a positive dollar environment overall.

High-yielding and commodity-linked currencies such as the Australian dollar fell after European equities snapped four straight sessions of gains led by commodity stocks.

Data exceeding forecasts has weighed on the dollar the last few weeks as investors have moved into other growth-sensitive currencies such as the euro, as well as the Australian and New Zealand dollars.

Despite the slight setback in Wednesday's durables report, many analysts think the overall global growth theme is intact.

"I think this is just a little bit of a give-back from the previous sessions' gains and sort of a retracement of the overall trend of dollar weakness," said Camilla Sutton, senior currency strategist at Scotia Capital in Toronto.

In late morning New York trading, the ICE Futures' dollar index rose 0.6% to 78.712. The euro slipped 0.5% to $1.4230.

Earlier in the session, the euro got a brief boost after the Munich-based Ifo think-tank's business climate index rose to 90.5 from an upwardly revised 87.4 in July, beating an 88.9 median forecast in a Reuters poll .

The euro rose to a 2-1/2 month high versus the pound above 88 pence in the wake of the Ifo report and was last at 87.72 pence, up 0.3%.

Sterling fell to a six-week low against the greenback to $1.6157 , according to Reuters data. It last traded at $1.6212, down 0.7% on the day.

Against the yen, the dollar was up 0.3% at 94.46 yen. To top of page

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