Dollar dips on concerns over US banking sector, eurozone inflation
The dollar dipped against the euro Monday on fresh concerns for the US banking sector and renewed signs of inflation in the eurozone.
The single European currency in late-day trade was at 1.5742 dollars, up from 1.5703 late Friday.
The dollar was also lower against the yen, falling to 107.47 yen from 107.85 on Friday.
Currency traders said investors were unsettled by news over the week end that US regulators had closed two failed banks, the First National Bank of Nevada and the First Heritage Bank in Newport Beach, California.
"These two failures bring to seven the number of bankruptcies since the start of the year in the banking sector and do not augur well for a rapid return of investor confidence in the US banking sector," analysts at fund manager Aurel said.
The market is now awaiting key US economic data to be released later in the week, starting with an index measuring consumer confidence on Tuesday. A first estimate of US growth in the second quarter will be published on Thursday followed by figures on US job creation in July on Friday.
"We expect this week's data to be generally supportive of the dollar against the euro," analysts at Barclays Capital said.
But Lee Hardman of the Bank of Tokyo-Mitsubishi cautioned: "We believe that the recent positive dollar sentiment is likely to be severely tested in the week ahead given the release of several top tier US economic reports, which may prompt market participants to reassess the US economy's resilience."
The euro meanwhile gained strength on a survey showing that German consumer confidence has plunged to a five-year low as oil-fuelled inflation "demolished" hard-won gains in employment and wages.
A confidence index compiled by the GfK institute fell to 2.1 points from 3.6 points in its previous survey, its lowest level since June 2003, with sub indicators of economic and income expectations dropping especially sharply.
"The positive momentum generated by the job market and the beneficial wage and salary increases compared with last year are consequently being demolished by inflation," GfK said.
The resurgence of inflation in the eurozone is seen as possibly inducing the European Central Bank to raise interest rates, which would make the euro more attractive to investors.
Elsewhere, the pound remained under pressure following a series of gloomy surveys on the British economy.
Hometrack reported that house prices fell 1.2 percent between July and June, while the Land Registry reported house prices in England and Wales fell 1.0 percent between June and May.
Added to this was a report from KPMG reporting that more than half of British employers expect to lay off workers in the coming months.
In London trading on Monday, the euro changed hands at 1.5742 dollars against 1.5703 late on Friday, 169.23 yen (169.35), 0.7901 pounds (0.7884) and 1.6271 Swiss francs (1.6279).
The dollar stood at 107.47 yen (107.85) and 1.0331 Swiss francs (1.0366).
The pound was at 1.9943 dollars (1.9913).
On the London Bullion Market, the price of gold rose to 923.50 dollars per ounce at the fixing from 920.50 dollars late on Friday.
AFP
