Forex - Dollar rises to 1-month high amid credit fears

The dollar rose to a one-month high against a basket of major currencies on Tuesday as growing signs that U.S. credit market turmoil is spreading overseas left investors seeking safety.
News that a Canadian trust was not able to repay some short-term debt sent investors slashing their bets against the greenback, particularly after last week's news that French bank BNP Paribas had frozen some funds because of sub-prime concerns.
Analysts said "Across global asset prices, it looks like there is some position unwinding going on and that is filtering through to FX where some of the biggest positions are long Euro, long Sterling and short Dollar".
The EurUsd was down 0.55% to 1.3532 the lowest in six weeks. It began to weaken overnight after reports that Spanish bank Santander is facing up to 2.2 billion euro ($3 billion) exposure to high-risk U.S. loans.
Against the yen, the EurJpy was down 1.16% at 159.04 while the UsdJpy was down 0.61% at 117.55, as major U.S. stock indexes all fell more than 1 percent.
The equities markets on Wall Street continued to dictate the yen's direction. For the past several weeks, falling stocks have usually been interpreted as weakening appetite for risk, lifting the Yen.
GbpUsd dipped below 2.0000 after UK July inflation came in below the Bank of England's 2 percent target rate for the first time in over a year. It last traded at 1.9956, down 0.78%.
The UsdCad rose 1.24% to 1.06900 after two Canadian trusts said on Tuesday that they were unable to place asset-backed deals. On Monday, niche Canadian investment bank Coventree Inc. said the credit problems caused by losses in the U.S. sub-prime mortgage sector had left it unable to replace maturing debt. Analysts said, "We got a bit of news out that there might be more trouble up here in the asset-backed sub-prime sector".  
The euro faced pressure as expectations of a rate hike in the euro zone were offset by weaker-than-expected growth data and further European Central Bank action to calm short-dated money markets. That contrasted somewhat with U.S. data showing the U.S. trade balance unexpectedly narrowed in June, while July producer prices rose more than expected. Federal Reserve officials have said inflation remains their main concern and analysts said signs of accelerating inflation would prevent the central bank from cutting interest rates.