LONDON (MarketWatch) - The U.S. dollar was under pressure versus most major rivals Monday, sliding as risk appetite revived following U.S. President-elect Barack Obama's pledge to rescue the auto industry and to push a major fiscal stimulus in an effort to battle the recession.
"It's all Obama-related," said Simon Derrick, chief currency strategist at Bank of New York Mellon. "It really is down to talk about a bailout package for the auto industry and by and large ignoring the scale of fiscal deficits."
In a television interview Sunday, Obama said management at the Big Three U.S. auto companies made "repeated strategic mistakes." But with millions of Americans directly or indirectly reliant on the companies for their jobs, court-supervised bankruptcy should be avoided, he said.
Obama also pledged a recovery plan that includes major public-works programs. See full story.
Asian equity markets surged early Monday, with Tokyo's Nikkei index rising more than 5%. See Asia Markets.
European markets were also posting gains, with London's FTSE 100 stock index up by around 4%, while U.S. stock index futures pointed to a higher open on Wall Street. Read Europe Markets.
The dollar index , which tracks the performance of the dollar against a trade-weighted basket of six major currencies, traded at 85.895, down from 87.14 in North American activity late Friday.
After edging above $1.29 versus the dollar, the euro traded at $1.2893, up from $1.2696 late Friday. The British pound pushed temporarily above $1.50 and traded at $1.4935, up from $1.4714.
The dollar was little changed against the Japanese currency, slipping to 93.21 yen from around 93.30 yen late Friday.
Derrick said risk appetite appeared to fade toward mid-morning in European trade.
With other countries also set to ramp up deficits, worries about U.S. budget deficits are unlikely to weigh down the dollar any time soon, he said. Meanwhile, global economic uncertrainty and the potential for further fiscal turmoil will likely continue to benefit the greenback whenever risk aversion returns, he said.
"Any doubts if the dollar is the ultimate safe haven in these uncertain times have been very short-lived so far," agreed strategists at Commerzbank in Frankfurt.
Low liquidity in currency markets, meanwhile, makes it less likely the euro will break out of its $1.24 to $1.32 trading range veruss the dollar, they said. "But if a break happens, we still regard a break to the downside as more likely."
