Dollar up as confidence data dims risk demand

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) - The dollar gained against a basket of currencies on Tuesday after a report showing an unexpected drop in U.S. consumer confidence for June, prompting investors to seek shelter in the greenback.

The weak consumer confidence report drove U.S. stocks lower, put a halt to an early sell-off in the dollar, and dampened hopes for an early recovery around the world.

"The market is getting comfortable with the 'green shoots' theory so investors need a high hurdle for them to buy currencies other than the dollar," said David Watt, senior currency strategist at RBC Capital Markets in Toronto.

"We're still seeing stress and strains in the market. We're going into the earnings season now that the second quarter has ended and people are cautious."

Analysts also said the simultaneous end to the month, quarter and half year led to increased volatility in foreign exchange trading, exacerbating intraday moves in currencies. These month-end and quarter-end flows have supported the dollar, though, analysts said, as investors sought to rebalance their portfolios.

In early afternoon trading in New York, the euro was last down 0.4 percent at $1.4022 after trading as high as $1.4152 earlier, according to Reuters data.

Despite Tuesday's gains versus the euro, the dollar was still on track for its first quarterly drop against the single currency since the first quarter of 2008.

At the same time, an index measuring the value of the greenback against a basket of major currencies declined more than 6 percent for the quarter, its first quarterly decline since the first three months of 2008. The index .DXY was up 0.4 percent at 80.166.