NEW YORK -- The euro gained to intraday highs against the dollar and yen early Tuesday on a bounce in crude-oil prices and global stocks following a day earlier sell-off.
After a sharp renewal of risk aversion Monday, financial markets are experiencing a bit of a rebound.
The euro rose as high as $1.4018. It also gained to an intraday high of ¥134.40. At the same time, the dollar fell to session lows of C$1.1476 and 1.5022 Swiss francs. The Australian dollar hit a session high of $0.7921.
Some encouraging euro zone data reports overnight and the Federal Open Market Committee meeting Tuesday and Wednesday may also be working against the dollar.
The latest German consumer confidence and euro zone purchasing managers' surveys were taken as evidence that the worst of the downturn has passed.
Currency analysts at Credit Suisse added: "The dollar's immediate problem is market concern about the [Federal Reserve's] inflation-fighting credibility, particularly given quantitative easing.
"We see ways for the Fed to salve some of these concerns, but we doubt the Fed will turn hawkish enough to support the dollar," said Credit Suisse in a research report.
In addition, early Tuesday, European Central Bank governing council member Guy Quaden said the euro zone's economy will be "less bad" for the rest of the year before improving progressively in 2010.
"There are some green shoots in the economy. The enormous stimulus moves made by the national governments and lower interest rates will have an effect," Mr. Qauden said.
At 10 a.m. Eastern, U.S. existing home sales for May will be closely watched for the dollar's next move.
Tuesday morning in New York, the euro was at $1.3999 from $1.3865 late Monday, while the dollar was at ¥95.80 from ¥95.99, according to EBS. The euro was at ¥134.13 from ¥133.12. The pound was at $1.6352 from $1.6349, while the dollar was at 1.0734 Swiss francs from 1.0862 Swiss francs.
Still, currencies are within recent ranges as uncertainty remains high.
Overnight, the UBS Risk Index showed appetite for higher yielding currencies collapsed.
"[Our] Risk Index retreated so sharply that it now sits in risk-aversion territory. Weaker equity markets were by far the main catalyst, and stocks have now underperformed Treasurys on a monthly basis," said analyst Gareth Berry.
The Canadian dollar is higher Tuesday morning as it rebounds from Monday's staggering loss, supported by higher stocks and commodities.
A report from BMO Capital Markets said that, like most of the majors, the Canadian dollar seems to be trading sideways.
The U.S./Canadian pair still feels like it has room to go higher, particularly in light of both euro/Canadian dollar cross and the Australian/Canadian dollar cross taking out topside resistance levels, BMO said.
"Overall the (U.S. dollar) rally seems to be taking a pause, but still looks to grind higher. As a result, any pullbacks should be supported," it said.
The U.S. dollar was trading at C$1.1481 from C$1.1515 late Monday.
