Dollar steadies after slide, oil retreats

New York (Feb 4) The U.S. dollar steadied on Wednesday after its worst day in more than a year, and a retreat in oil prices after four days of gains halted a rally in European stock markets.

Globally, investors' appetite for risk appears much stronger than it was a week ago. Oil has bounced almost 20 percent in value inside a week, stock markets are back on the rise and the euro is up almost 4 cents from low against the dollar.

But for the dollar that may simply add up to a clearing of the decks before another push higher, while a heady brew of concerns over politics, growth and monetary policy has left stocks struggling for clear direction.

In Europe much attention is focussed on Greece, where shares fell 1 percent in early deals and government bond yields rose on a report that the European Central Bank is unwilling to back stop-gap government financing plans. [ID:nL4N0VD5XE]

"Sentiment is proving oh so fickle on little news, a warning of illiquid and volatile markets later in 2015," analysts from French bank Societe Generale said in a morning note to clients.

"We need to be clear in Greece, before talking debt relief, that the new government is intent on reform. Today's press on Greece has now turned less positive than earlier this week."

Earlier, Asian shares had taken Wall Street's lead to reach three-month peaks, a reflection of the revived risk sentiment that has dented the U.S. dollar and sovereign bonds.

The dollar was 0.1 percent higher on the day against a basket of currencies. .DXY

"The dollar bid bias remains in place and if we continue to see good jobs data as well as earnings improve in the United States in the coming days, that could bring the shine back," said Jeremy Stretch, head of currency strategy at CIBC World Markets.

Much will depend on whether oil can sustain its recent rally, thus helping to underpin energy stocks and lessening fears of global deflation.

Brent crude prices LCOc1 were down almost 1 percent at $57.43, following a rise of almost 6 percent on Tuesday. U.S. crude CLc1 was quoted 85 cents lower at $52.20, but that compares with a low last week of $43.58.

Overall in Europe, stock markets were marginally higher .FTEU3 but Germany's main DAX index and London's FTSE 100 were a touch lower, down 0.2 and 0.1 percent respectively. .GDAXI .FTSE

In Asia the Nikkei .N225 closed 2 percent higher as banks outperformed on strong earnings from Mitsubishi UFJ Financial Group (8306.T).

Shares in Shanghai .SSEC firmed 0.35 percent amid speculation that China's central bank would be the next to ease policy following moves in Australia and Singapore.

A survey suggesting China's services sector grew at the slowest pace in six months in January only added to the expectations of more stimulus. A newspaper reported Chinese provinces would invest 15 trillion yuan ($2.4 trillion) in infrastructure and other projects.

Source: Reuters