FOREX-Dlr up on slightly better risk demand, Fed view

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By Veronica Brown

LONDON, May 12 (Reuters) - The dollar rose a full percent against the yen on Monday and approached a two-month high versus a basket of currencies, boosted by a slight rise in risk demand and growing speculation that U.S. interest cuts may be ending.

Weak economic data suggesting that Australia and New Zealand may be heading for rate cuts initially pushed down the high yielding currencies of both countries, as lower borrowing costs would trim their rate advantage against other currencies.

Stock markets and sterling were cheered as results from European banking heavyweight HSBC (HSBA.L: Quote, Profile, Research) came in stronger than expected [nL12579110].

Market liquidity was thin however, with many European markets closed for holidays, and analysts said that this had sharpened currency moves.

News that a major earthquake had shaken parts of China had limited initial impact on the currency market as investors awaited more news of damage. Click on [nSP239734]

The dollar has rallied in recent weeks on speculation that the Federal Reserve may be nearing the end of its rate-cutting cycle, having slashed them by a total of 3.25 percentage points since September to 2 percent.

Analysts said that while risk appetite had picked up with stock markets rising, many investors stayed cautious about the health of the global economy and financial systems.