Dollar softer, but euro fails get a boost

Mon Apr 30, 2012 7:02am EDT
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By Anirban Nag

LONDON (Reuters) - The dollar briefly fell to a two-month low against a basket of currencies on Monday, hurt by signs that the U.S. economic recovery was losing momentum, which keeps alive the chances of further monetary easing by the Federal Reserve.

Despite the dollar's problems, the euro failed to gain much traction, with investors looking to sell at higher levels as harsh austerity measures take a toll on economic activity across the region.

Spain slipped back into recession as gross domestic product shrank 0.3 percent in the January to March quarter, data showed on Monday. Traders were likely to be wary of the euro ahead of the second round of the French presidential vote as well as elections for a new Greek parliament next weekend.

The dollar .DXY touched 78.638 against a basket of currencies, its lowest since March 1, before rising to 78.855, up 0.2 percent on the day.

But the euro fell 0.3 percent against the dollar to $1.3215, off a near one-month high of $1.32706 on Friday, with near term support at its 55-day moving average of about $1.3206.

"The dollar is under pressure but the euro is by no means out of the woods and the Spanish GDP data is a pointer," said Peter Kinsella, currency strategist at Commerzbank, London.

"Besides, liquidity in the markets is a bit thin because of holidays this week and this can make price movements a bit exaggerated."

Markets in most of Europe will be shut on Tuesday for the May Day holiday, while Japan celebrates Golden Week holidays, keeping trading on foreign exchange markets a bit subdued.   Continued...

United States dollar banknotes are seen at the Museum of American Finance in New York October 15, 2010. REUTERS/Shannon Stapleton