By Nicholas Hastings
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--The dollar was suffering in Europe Tuesday on continued optimism over the global recovery and the recent spat of strong third-quarter earnings.
However, there are already signs that the rally in global equities is losing momentum, with European stocks failing to extend the gains seen in the U.S. and Asia.
Strong earnings from Apple late on Monday kept optimism alive and the Dow Jones Industrial Average rising 1.0% on the day.
Minutes of the latest Reserve Bank of Australia meeting also contributed to the view that the time is coming for other major central banks to consider exiting their soft monetary stances.
"Keeping interest rates at very lows levels for an extended period could threaten the achievement of the inflation target over the medium term," the minutes of the bank's Oct. 6 meeting said.
"The forecast trough in inflation was not as low as previously expected, and by 2011 inflation could be rising again," the minutes added.
In Asia, the Nikkei gained another 1.0% and the Shanghai Composite Index rose 1.2%.
The price of crude oil managed to rally briefly over $80 a barrel even though it has since slipped back to $79.29 a barrel.
The euro, meanwhile, appeared set to break over $1.50 for the first time since the middle of last August after euro-zone finance ministers who met on Monday failed to convince financial markets that they are seriously concerned about the euro's recent strength.
The ministers merely repeated their support for the strong dollar policy, with the Eurogroup Chairman Jean-Claude Juncker suggesting that the single currency could rise even further before becoming a problem.
"I'm not concerned too much by the exchange rate we are observing. But if it continues in the way it started weeks ago, I could become concerned at a certain junction. Don't ask me where that junction is located exactly," Juncker said.
Some analysts suggested that this lack of Ecofin concern will help to propel the euro over $1.50.
"Fading speculation about messages against euro strength by policy makers should prepare for the $1.50 break: expect stop-losses and option barriers to amplify volatility in the first waves of the attack," said the currency strategist team at UniCredit Markets and Investment Banking.
As European trading got underway, however, there were signs that some of the bullish global momentum that was hurting the dollar is subsiding.
European stock markets were nearly 0.5% lower, with financials under pressure and investors appearing keen to take profits after both the U.K. and French stock markets closed at 2009 highs on Monday.
By 0930 GMT, the dollar had fallen to Y90.25 from Y90.61 late Monday in new York, according to EBS.
The euro was up at $1.4969 from $1.4943 but down at $1.3511 from $1.3540.
The dollar was also down at CHF1.0104 from CHF1.0127. The pound was up at $1.6389 from $1.6371 even though new data showed the public sector deficit rising to the highest level ever recorded in September.
In Eastern Europe, the euro rose to HUF265.15 from HUF264.48 and to PLN4.1793 from PLN4.1701 but it eased back a little to CZK25.750 from CZK25.760.
-By Nicholas Hastings, Dow Jones Newswires; 44 20 7842 9493; nick.hastings@dowjones.com
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