October 16, 2018 / 2:08 PM / 9 months ago

FOREX-Dollar weakens as stock gains show improving risk sentiment

    * 'Risk on' tone reduces demand for U.S. dollar
    * Emerging markets outperform, safe haven currencies soften

 (New throughout, updates prices, market activity and comments
to U.S. market open, new byline, changes dateline, previous
    By Karen Brettell
    NEW YORK, Oct 16 (Reuters) - The U.S. dollar index dropped
to more than two-week lows on Tuesday while emerging market
currencies outperformed, as rising stock markets reflected
improving risk appetite.
    U.S. stocks opened higher, led by technology stocks, as
upbeat earnings from blue-chip companies helped ease jitters
over the impact of an ongoing U.S.-China trade war and other
global issues on corporate profits.
    “It seems as if we have a ‘risk on’ tone. Equity prices seem
to be rising globally again and reversing a little bit of the
panic that we saw last week,” said Mark McCormick, North
American head of FX strategy at TD Securities in Toronto.
    The greenback was supported last week as benchmark 10-year
Treasury yields surged to a seven-year high of 3.26 percent,
while stocks tumbled.
    Yields are now consolidating at around 3.16 percent,
reducing demand for the dollar. The better risk tone on Tuesday
also reduced demand for safe haven currencies the Japanese yen
and Swiss franc.
    “It’s a lack of negative headlines today, which if anything
else is just a change from what we’ve seen,” said Erik Nelson, a
currency strategist at Wells Fargo in New York. “The risk
sensitive emerging currencies are particularly outperforming
while the yen and the Swiss franc are on the soft side.”
    Concerns about rising tensions between Western powers and
Saudi Arabia weighed on markets on Monday. Saudi Arabia has been
under pressure since a prominent Saudi journalist Jamal
Khashoggi, a critic of Riyadh and a U.S. resident, disappeared
on Oct. 2 after visiting the Saudi consulate in Istanbul.

    U.S. Secretary of State Mike Pompeo met Saudi Arabia's king
and crown prince to discuss the disappearance of Khashoggi on
Tuesday and Turkey's foreign minister said the envoy would bring
information about the case to Ankara.
    Data on Tuesday showed that U.S. industrial production
increased for a fourth straight month in September, boosted by
gains in manufacturing and mining output, but momentum slowed
sharply in the third quarter.
    The New Zealand dollar advanced against the greenback as the
domestic inflation rate came in higher than expected in the
third quarter.
    Currency bid prices at 9:57AM (1357 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1598        $1.1577     +0.18%         -3.32%      +1.1621     +1.1566
 Dollar/Yen       JPY=        112.1300       111.7600    +0.33%         -0.48%      +112.1800   +111.7300
 Euro/Yen         EURJPY=     130.05         129.41      +0.49%         -3.79%      +130.2900   +129.4200
 Dollar/Swiss     CHF=        0.9890         0.9868      +0.22%         +1.51%      +0.9898     +0.9859
 Sterling/Dollar  GBP=        1.3217         1.3150      +0.51%         -2.18%      +1.3235     +1.3141
 Dollar/Canadian  CAD=        1.2936         1.2990      -0.42%         +2.85%      +1.2998     +1.2936
 Australian/Doll  AUD=        0.7146         0.7130      +0.22%         -8.40%      +0.7151     +0.7113
 Euro/Swiss       EURCHF=     1.1470         1.1426      +0.39%         -1.87%      +1.1472     +1.1429
 Euro/Sterling    EURGBP=     0.8772         0.8805      -0.37%         -1.25%      +0.8813     +0.8753
 NZ               NZD=        0.6586         0.6549      +0.56%         -7.06%      +0.6596     +0.6545
 Dollar/Norway    NOK=        8.1286         8.1503      -0.27%         -0.96%      +8.1618     +8.1179
 Euro/Norway      EURNOK=     9.4279         9.4402      -0.13%         -4.27%      +9.4474     +9.4187
 Dollar/Sweden    SEK=        8.8861         8.9516      -0.59%         +8.34%      +8.9626     +8.8828
 Euro/Sweden      EURSEK=     10.3070        10.3680     -0.59%         +4.76%      +10.3780    +10.3080

 (Additional reporting by Saikat Chatterjee in London
Editing by Susan Thomas)
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