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LONDON (Thomson Financial) - The dollar fell to a one-week low against the euro as risk appetite picked back up again, boosting equity markets and reversing some of the recent trends which have benefited the dollar.

Notably, the revelation today from Societe Generale that a single trader carried out a massive 4.9 bln eur fraud has calmed market fears of an impending global recession following the tumble on equity markets on Monday, with market players concluding that the SocGen fraud was largely to blame for the falls.

"It appears the betting across most asset classes is leaning toward anticipating a shallow and short-lived US recession," said Randolph Donney at Thomson IFR Markets.

Meanwhile, the dollar has also suffered after another set of weak US housing market data this afternoon contrasted with a stronger-than-expected German Ifo survey this morning. The news comes amid a growing feeling in the market that the Federal Reserve's aggressive interest rate cuts will not be emulated in Europe and the UK.

Figures showed US existing home sales slumped by 2.2 pct in December to a 4.89 mln unit annual rate, below forecasts for a 4.95 mln unit annual sales rate. The National Association of Realtors also reported that 2007 saw the first ever annual decline in the median price existing homes since it began tracking the data in 1998.

This contrasted with the earlier Ifo data which showed the German business climate index unexpectedly rising to 103.4 in January from 103.0 in December. Analysts had forecast a further decline to 102.0.

"The recovery in the business climate in the manufacturing sector suggests that German industry is still benefiting from buoyant foreign demand," said Jurgen Michels at Citigroup.

Analysts also pointed to hawkish comments from European Central Bank board member Axel Weber, who was reported as saying that "certain wishful thinking" has been priced into interest rate expectations, suggesting that the market may be jumping the gun in forecasting a rate cut in the euro zone.

"Weber's views are probably not representative (of the ECB as a whole), but they have grabbed a lot of market attention," said David Brown at Bear Stearns.

Meanwhile, the pound gained further, hitting a seven-day high against the dollar as it continued to benefit from yesterday's hawkish Bank of England minutes and recent comments from governor Mervyn King.

The data have highlighted that the BoE does not intend to follow the Federal Reserve's aggressive monetary easing after it announced an unscheduled 75 basis point rate cut yesterday, although markets still expect a 25 basis point cut in UK rates next month.

London 1700 GMT London 1247 GMT

US dollar

yen 106.68 up from 106.63

sfr 1.0868 down from 1.0893

Euro

usd 1.4735 up from 1.4669

yen 157.22 up from 156.44

sfr 1.6019 up from 1.5982

stg 0.7467 down from 0.7468

Sterling

usd 1.9728 up from 1.9637

yen 210.47 up from 209.36

sfr 2.1448 up from 2.1398

Australian dollar

usd 0.8787 up from 0.8751

stg 0.4453 down from 0.4455

yen 93.74 up from 93.30