The dollar rose Monday versus most major rivals, boosted by a flight back into assets perceived as less risky on renewed worries about the financial sector and the world economy.
The greenback fell through important support levels last week, however, and strategists cautioned that the dollar may have further to fall on ideas the global economy is beginning to bottom out.
The dollar index , a measure of the greenback against a trade-weighted basket of major rivals, rose to 82.724 after falling Friday to a four-month low below 82.50.
The dollar fell 1.1% versus the Japanese currency to 97.31 yen.
The dollar and the Japanese yen have tended to gain ground during periods of financial and economic uncertainty, often rallying as world equity markets fall. U.S. stocks retreated after the opening ball and European markets remained in negative territory.
Worries about the financial sector follow a report in The Wall Street Journal that said U.S. banks received concessions from the U.S. Federal Reserve regarding government demands for fresh capital infusions. Fed Chairman Ben Bernanke is scheduled to deliver a speech on the recent bank stress tests late Monday.
Results from HSBC Holdings also contributed to unease over riskier assets, wrote strategists at CIBC. Europe's biggest bank said that excluding the gains, which were due to a fall in the market value of its own debt, underlying pretax profit was down compared to a year ago.
The bank also said that the price of its debt rebounded in April, meaning much of the benefit it recorded in the first quarter will be reversed in the second quarter. See full story.
Meanwhile, the euro tracked falling European shares to lose 0.4% versus the dollar to $1.3578.
March industrial production data for France and Italy released on Monday showed larger-than-expected declines, reinforcing expectations for a steep drop in first-quarter euro-zone gross domestic product.
France's statistical agency said production fell 1.4% in March, to leave output 16.1% below the level seen in March 2008. Italian industrial production dropped 4.6% for an annual fall of 23.8%.
"The upshot is that the euro-zone economy will contract much more sharply this year than the consensus forecast of 3.4%, probably to the tune of 5%," said Daniele Antonucci, European economist at Capital Economics.
