NEW YORK (AFX) -- The dollar fell against the euro, but was little changed versus the yen in thin trading Monday, with market players looking to economic data later in the week to lend direction to trading.
The greenback reversed early gains posted after a retreat in gold and commodities markets prompted traders to trim bearish dollar positions. Gold for June delivery fell to a low of $643.50 an ounce on the New York Mercantile Exchange, an intraday level the contract hasn't seen since April 28. Prices were last down $5, or 0.8%, at $652.50 an ounce.
'There's been little news around through today's session to provide much direction for currencies although a general up-trend for gold off session lows has left the dollar under a degree of pressure,' said Tim Wilbraham, a foreign-exchange trader at CMC Markets.
In New York trading, the euro was at $1.2833 from $1.2771 late Friday. The dollar traded at 111.76 yen, up from 111.72 yen, after rising to 112.94 yen, the highest level since May 5. The British pound was at $1.8842 from $1.8786. The dollar traded at 1.2061 Swiss francs from 1.216 francs late Friday.
A dip of 10-year treasury yield under 5%, also put 'a little bit of downward pressure' on the dollar, said Ronald Simpson, currency strategist at research firm Action Economics.
Long-term treasurys rallied Monday, pushing the yield on the benchmark security to its weakest level in a month, as investors selling stocks moved their money into fixed-income investments.
The greenback staged a modest recovery last week following a sharp correction in commodity prices and as hawkish comments from Federal Reserve officials fueled expectations the interest-rate differential continues to benefit the dollar.
With little economic data on the calendar until Wednesday, 'trading is likely to be range bound as the market digests the massive euro/dollar rally over the past 8 weeks,' said Boris Schlossberg, senior currency strategist at FXCM.
Currency traders will scrutinize readings on durable goods orders and new home sales for further clues on the U.S. economy and interest-rate outlook, according to CMC's Wilbraham.
'If U.S. housing data proves resilient and if U.S. GDP figures confirm the market's lofty expectation of upward revisions, the dollar counter rally may have more fuel left,' said Schlossberg in a note. 'But for now it remains just that -- a counter-trend rally in an overall dollar bearish market.'
Mixed comments on euro
The euro was partly helped by 'hawkish' comments about 'inflation vigilance' from Klaus Liebscher, a member of the European Central Bank's governing council, said Mike Malpede, senior currency analyst at Man Global Research.
Also on Monday, Dutch Finance Minister Gerritt Zalm said he is not worried about the euro. Zalm said that the euro is 'in the normal region,' and that the currency appreciation helps contain inflation.
The euro weakened last Wednesday after French Finance Minister Thierry Breton said European officials will do 'everything' in their power to limit the euro's strengthening further against the dollar. But he softened his tone Friday by saying that the euro was trading 'within acceptable ranges.'
In European trading, the euro found modest support after stronger-than-expected data showed euro-zone external trade balance swung to a surplus of 1.2 billion euros in March. In February, the euro zone showed a 3.1 billion-euro deficit.
Yen pressured by interest-rate outlook
The yen remained under pressure after Bank of Japan Governor Toshihiko Fukui damped expectations the central bank will start raising interest rates in June.
The BOJ on Friday kept interest rates unchanged at 0%. At a post-policy meeting news conference, Fukui said, 'We did not specifically discuss the end to zero interest rates at this policy meeting,' and that 'We have no preset idea on the specific timing for exiting zero interest rates.' He also reiterated that rates would be kept low after the central bank ended its zero-rate stance.
Currencies that are particularly linked to commodity prices, such as the Australian dollar and the New Zealand dollar, came under particular pressure as commodity prices declined.
The Australian dollar last traded down 0.7% at $0.7511, while the New Zealand dollar was down 0.4% at $0.6187. This story was supplied by MarketWatch. For further information see www.marketwatch.com.
© 2006 AFX News