The U.S. dollar slipped versus major rivals Tuesday after a survey showed German investor confidence hit its highest level in more than three years and British inflation failed to show an expected decline. The Mannheim-based Center for European Economic Research, or ZEW, said its economic sentiment index rose to 56.1 in August, its highest level since April 2006. That's up from 39.5 in July. The gauge measures economic expectations among German institutional investors and financial professionals. In Britain, the Office for National Statistics said annual consumer price inflation rose 1.8% in July, unchanged from June but still below the Bank of England's 2% annual target. Economists had expected a decline to 1.6%. "The strong advance of the ZEW index and the robust U.K. CPI inflation in combination with stabilizing Chinese equity markets have allowed currencies to move up against the (dollar and Japanese yen), reaching levels [where] we like selling again," wrote strategists at BNP Paribas. The dollar and yen have tended to lose ground during periods of rising economic confidence and, in particular, rising equity markets, while gaining ground when investors become more averse to risk. "Risk aversion once again took first seat yesterday as global equity markets were shellacked, spurring dollar and yen purchases," said Jessica Hoversen, an analyst at MF Global Research in Chicago. The euro spiked higher after the ZEW survey, hitting a session high near $1.4155. It remains slightly higher at $1.4101, up from $1.4082 in North American trade late Monday. The euro traded at 134.02 Japanese yen, up from 132.97 yen. The British pound was up 0.7% at $1.6450 versus the dollar. Sterling had traded around the $1.70 level earlier this month, but has retreated sharply since the Bank of England decided to boost its quantitative easing program by an unexpectedly large 50 billion pounds ($82 billion). Asian equities seesawed in choppy trading, but closed mostly higher. European stocks were higher and U.S. stock index futures pointed to a rebound on Wall Street following Monday's decline. "Though momentum is with unwinding of risk and consequent U.S. dollar and Japanese yen gains, there is sufficient uncertainty on U.S. dollar direction that near-term break from well-established ranges is unlikely," said Patrick Bennett, Asia forex and rates strategist at Societe Generale. The dollar index (DXY), which tracks the greenback against a trade-weighted basket of six major currencies, traded at 79.172, down slightly from 79.288 late Monday. Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=O7IvTgey%2BvZ8RaYPx9d70w%3D%3D. You can use this link on the day this article is published and the following day.

Source