RTTNews - The dollar posted strong gains for a second day versus most major currencies, getting a huge boost from renewed risk aversion as stocks sold off around the world.

Following last week's troubling economic news from the US, worrying figures from Asia on Monday sparked what many observers feel will be the start of a correction to the summer rally in equities.

US consumers remain downbeat, as reflected in recent data on consumer confidence and retail sales. Elsewhere, the Japanese economy emerged from recession last quarter, but at a slower than expected pace.

In response, overheated Shanghai shares plunged more than 5 percent, Tokyo stocks tanked, and the bears were in firm control on Wall Street, fueling interest in the safe haven dollar and yen.

The dollar jumped to a 3-week high versus the euro, rising to 1.4044. Earlier this month, the dollar hit a 2009 low of 1.4446, but with stocks in retreat, it is not likely test those levels in coming days.

Eurostat reported Monday that the euro area trade balance showed a surplus of EUR 4.6 billion in June, larger than the revised EUR 2.1 billion surplus recorded in May.

Meanwhile, the dollar rose to a monthly high of 1.6274 versus the sterling, pulling further away from a 10-month low of 1.7012 hit earlier in August.

Home sellers in the U.K. reduced their asking prices in August after hiking slightly in July, but sentiment continued to improve, property website Rightmove said Monday.

Average asking prices dropped 2.2% month-on-month to GBP 222,762 in August after rising 0.6% in July. Compared to the previous year, prices were down 3.1%, the same pace as in July.

The dollar failed to rally versus the yen, easing to a 3-week low of 94.20. Amid concerns about a double-dip recession, both the dollar and yen have risen against higher-yielding counterparts since Friday morning.

The Japanese economy pulled out of its worst recession since World War II in the second quarter on government stimulus measures and strong exports.

Monday, the Cabinet Office said real gross domestic product expanded 3.7% on an annualized basis during the three months to June, after shrinking for four straight quarters. However, the annualized growth was smaller than the 3.9% increase expected by economists, following a revised decline of 11.7% in the first quarter.

Back in the US, conditions for New York manufacturers improved for the first time in well over a year in the month of August, according to a report released by the Federal Reserve Bank of New York on Monday, with the index of activity in the sector coming in well above expectations.

The New York Fed said its general business conditions index rose to 12.1 in August from a negative 0.6 in July, with a positive reading indicating an expansion in the manufacturing sector. Economists had been expecting the index to increase more modestly to 3.0.

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