Yen stabilizes after Japanese ruling party's election defeat By William L. Watts, MarketWatch LONDON (MarketWatch) -- The dollar traded mostly higher Monday, regaining some ground on the euro as investors appeared to book profits on the single currency's rebound last week. "Although market sentiment was universally euro-bearish in early June, opinion has clearly shifted in the past month," said Gareth Berry, currency strategist at UBS. The euro has rebounded from a four-year low -- $1.1877 on June 7 -- and traded above $1.26 by the end of last week, buoyed as worries about Europe's banking system faded, Berry said. The single currency (CUR_EURUSD 1.2562, -0.0077, -0.6092%) traded at $1.2566, down from $1.2644 late Friday. Plans to publish "stress tests" to be administered to 91 European banks have been key in helping to boost the euro, while worries about sovereign risk have receded following a recent series of successful bond auctions. But a report in Germany's Handelsblatt newspaper suggested the stress tests could be more stringent than initially thought, potentially underlining the threat of more bank failures, analysts said. Meanwhile, the dollar index (DXY 84.36, +0.41, +0.49%) , which tracks the performance of the U.S. unit against a basket of six major currencies, rose to 84.417 from 83.959. The British pound (CUR_GBPUSD 1.5030, -0.0023, -0.1528%) declined to $1.5012 from $1.5067. It fell to an intraday low below $1.50 after the Office for National Statistics reported first-quarter gross domestic product expanded by an unrevised 0.3% and said the recession that ended in the fourth quarter of 2009 was deeper than initially thought. Revisions to past data would likely provide comfort to Bank of England policy makers eager to keep interest rates on hold at a record low 0.5% in anticipation that spare capacity in the U.K. economy will bring inflation back below the central bank's annual 2% target in coming months. Read about the British data. Japan's yen, which retreated versus major counterparts in Asian trading to start the week, rebounded to a level nearly unchanged against the dollar in European dealings. Against the yen, the dollar (CUR_USDYEN 88.6300, -0.0200, -0.0226%) gave up an early gain to trade at ¥88.57, virtually unchanged from its level in late North American trading Friday. Earlier in the session, it rose as high as ¥89.16. Japan' ruling Democratic Party of Japan lost more parliamentary seats than expected, winning just 44 of them, far short of Prime Minister Naoto Kan's goal of 54, and creating some uncertainty over the nation's policy direction. Read more on Japan election and market impact.

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