Dollar plummets in London

The dollar fell to a four-month low against a currency basket on Tuesday as solid UK data fanned optimism that the global recession is easing, boosting sterling, as well as the euro and other perceived higher-risk currencies. Stronger-than-expected UK retail sales, housing market and industrial production data pushed sterling up well over 1 percent versus the dollar, while the euro also hit a seven-week high against the US currency.
The higher-yielding Australian and New Zealand dollars benefited from the rally in riskier assets, which helped to push oil prices to a six-month high just below $60 a barrel, while US stock futures also edged higher.
"The UK data is highlighting that the worst is probably behind us, which is giving a bit of a bid to riskier assets," RBC Capital Markets currency strategist Christian Lawrence said. European Central Bank President Jean-Claude Trichet said on Monday that the global economy is at an "inflection point" and could turn the corner soon.
At 1154 GMT the dollar index was down 0.8 percent on the day, hitting a four-month low of 82.138. The dollar index is well on track for its third consecutive close below the 200-day moving average and is below the longer-term technical support - now resistance - of the 200-day moving average at 82.755.
The euro rose 0.9 percent to a seven-week high of $1.3695. It is firmly on track for a third daily close above the 200-day moving average and second straight week above the 200-week moving average. Sterling was up 1.4 percent on the day at $1.5336, its highest since January 9.
The Australian dollar was up 0.9 percent at $0.7647, while the New Zealand dollar gained 0.6 percent to $0.6049. Against the yen, the euro rose 0.4 percent to 132.93 yen and the dollar fell 0.4 percent against the yen at 97.18 yen. UK surveys overnight showed retail sales rising at their fastest rate in three years last month, while house prices declined at their slowest pace in 15 months.
Adding to this, data also showed UK industrial and manufacturing output fell less than forecast in March. Investors also took heart from data from China overnight, which showed investment spending surged even though exports fell more steeply than expected.
"In the bigger picture not much has changed. The green shoots still have roots," said Maurice Pomery, managing director of Strategic Alpha in London. Michael Hart, currency strategist at Citigroup in London advised caution, however, noting the numbers are merely "less catastrophic" and that the currency market's technical picture is triggering much of the dollar selling from model funds.
Australia's government unveiled on Tuesday its largest deficit on record, cut its growth predictions and raised its jobless forecasts, though this failed to put a significant dent into the global risk rally.