European focus: dollar falls as market reduces risk-appetite

The dollar fell from close to a two- week high against the euro and traded at the lowest level in a week versus the yen on concern credit-market losses will widen, delaying any recovery in U.S. economic growth.
The dollar weakened as Asian stocks slumped after Standard & Poor's lowered its debt rating on three of the biggest U.S. securities firms and the Wall Street Journal reported Lehman Brothers Holdings Inc. may raise as much as $4 billion of extra capital to bolster its balance sheet. The yen advanced versus the New Zealand dollar and the South African rand as investors pared so-called carry trades.
The dollar is ``vulnerable,'' said Armin Mekelburg, a currency strategist at Unicredit Markets & Investment Banking in Munich. ``We shouldn't forget that the source of risk aversion is based on the U.S. subprime market, U.S. banks, credit markets and the U.S. economy.''
Gross domestic product in the 15 countries that use the euro increased 0.8 percent from the fourth quarter, compared with an earlier estimate of 0.7 percent, the European Union's statistics office in Luxembourg said today. Investment jumped 1.6 percent in the first three months of this year, the most since the second quarter of 2006.
From a year earlier, the economy expanded 2.2 percent in the first quarter. Fourth-quarter growth was revised down to 0.3 percent from 0.4 percent compared to the prior three months.

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