Dollar rebounds off year low vs euro, ends mostly higher as consumer confidence drops

Dollar gains on euro as consumer confidence drops

NEW YORK — The dollar rebounded in late trading Tuesday from a year low against the euro overnight as a measure of U.S. consumer confidence fell, distressing investors.

The greenback also gained steadily against most other European currencies, but dropped against the yen and some emerging-market currencies.

The dollar tends to falter when good economic news prompts buying of equities and riskier currencies, such as those in emerging markets. Bad signals and poor earnings usually help the dollar as investors seek safety.

The 16-nation euro dropped to $1.4177 from $1.4243 late Monday, after earlier climbing to its highest point this year at $1.4303. The British pound slipped to $1.6439 from $1.6498.

The dollar fell to 94.48 Japanese yen from 95.24 yen late Monday. Investors also consider the low-yielding yen a “safe-haven” currency.

The dollar has sold off heavily this summer, falling more than 7 percent since the beginning of May against a basket of currencies including the euro, yen, pound and other currencies, as the idea that the end of the recession was near picked up steam.

“The dollar’s decline is looking a bit stretched,” said Brown Brothers Harriman analysts in a note to investors Tuesday.

Investors and traders are “taking risk off the table following the remarkable earnings rally of the past two weeks,” said Bank of New York Mellon currency strategist Michael Woolfolk — but a continued drop in the dollar is likely later this week, he said, as he expects positive news from U.S. reports on gross domestic product and durable goods.

On Tuesday, the Conference Board, a private research group, said its index measuring consumers’ feelings had taken a turn for the worse this month. The Consumer Confidence Index fell to 46.6 from 49.3 in June. That’s the second straight month of decline. A reading of 90 signals Americans have a positive take on the economy.

Separately, the Federal Reserve Bank of New York said Monday that average daily volume in foreign exchange trading fell 26.3 percent in the six months through April 2009 to $527 billion from the same period through April 2008.

That’s the lowest level since October 2005, the New York Fed said.

The Bank of England said average daily turnover in April fell 25 percent to $1.356 billion from the previous year, and 20 percent from October 2008. London is the world’s biggest foreign-exchange trading center.

Fewer players in the space helps account for the big swings in currencies’ prices seen in recent months.

Liquidity in the currency markets hasn’t fully returned, while volatility is still high, said Brown Brothers Harriman analyst Marc Chandler.

The dollar was mixed against other currencies. It rose to 1.0746 Swiss francs from 1.0698 francs late Monday, and inched up to 1.0823 Canadian dollars from 1.0804. The buck was higher against most other non-euro European currencies, but fell against the Mexican peso, dipped against the South Korean won, and slid against the higher-yielding Australian and New Zealand dollars.