FOREX-US dollar up on higher risk aversion before Q1 earnings

Dollar rises before start of US earnings season

* Higher-yielding currencies down as risk appetite wanes

* Euro extends losses after euro zone Q4 GDP revised lower

(Adds details, updates prices)

By Vivianne Rodrigues

NEW YORK, April 7 (Reuters) - The U.S. dollar gained on Tuesday as a drop in global stocks, ahead of the start of what is expected to be a weak corporate results season, boosted the greenback's allure as a safe haven.

Data in Europe showing the euro zone economy recorded its deepest-ever quarterly fall in the fourth quarter of 2008, also weighed on the euro. For details, see [ID:nN07398955]

Bank stocks and industrial conglomerate shares led declines in Europe and on Wall Street.

"There is caution ahead of the earnings season," said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto. "Although we had some optimism about the economy in recent sessions, this earnings season would be a reality check." nvestors will learn more about the recession's toll on U.S. corporate profits in the comings weeks. According to data from Thomson Reuters, first-quarter earnings for S&P 500 companies are expected to fall by almost 37 percent versus a year ago as global demand slumps.

In late afternoon trading in New York, the euro fell 1.0 percent to $1.3272 after hitting a session low of $1.3228. Selling in the euro accelerated after data showed a record contraction in the euro zone economy.

In Europe, data was revised down to show the euro zone economy fell 1.6 percent in the fourth quarter from a previous 1.5 percent reading. The report coincided with a 12th straight month of decline in British manufacturing output in February and a record 50 percent fall in March steel output in Germany. [ID:nL7459179]

Meanwhile, a Business Roundtable survey released earlier showed U.S. chief executives' confidence in the economy set a second consecutive all-time low in the first quarter. More than two-thirds of the CEOs surveyed said they planned more layoffs and capital spending cuts in the next six months. [ID:nN07398955].

The dollar rose 0.5 percent against a basket of currencies to trade at to 85.189 .DXY. Investors tend to buy the dollar as a haven amid global risk aversion despite weak U.S. economic fundamentals.

RISK AVERSION

Eurodollar is being "driven down by a return to risk aversion," said Dan Cook, a senior market analyst at IG Markets Inc. in Chicago.

Cook added that if declines in stocks accelerate, eurodollar may once again move lower and test Tuesday's session lows at 1.3228-1.3227.

The euro also slid against the yen to trade 1.5 percent lower at 133.33 yen . The dollar was down 0.6 percent at 100.32 yen after dipping to 99.88 yen, but the greenback gained broadly elsewhere.

Meanwhile, the Australian dollar see-sawed against its U.S. counterpart after the Reserve Bank of Australia cut interest rates by 25 basis points to a record low 3.0 percent. [ID:nSYD452265]. The Australian dollar was last unchanged at US$0.7122 .

The New Zeland dollar also fell, sliding about 2 percent to a session low of 0.5743 .

Also on Tuesday, the Bank of Japan announced it was leaving interest rates at 0.1 percent. The decision was widely expected, though the BOJ also unveiled further steps to ease credit strains, announcing it would start lending against a wider range of municipal debt to support regional banks.