Yen stabilizes after Japanese ruling party's election defeat By Deborah Levine and William L. Watts, MarketWatch NEW YORK (MarketWatch) -- The dollar advanced versus most major currencies on 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 touched $1.27 last week, buoyed as worries about Europe's banking system faded, Berry said. The single currency (CUR_EURUSD 1.2571, -0.0068, -0.5380%) fell to $1.2560 from $1.2644 in late North American trading on Friday. The dollar index (DXY 84.28, +0.34, +0.40%) , which tracks the performance of the U.S. unit against a basket of six major currencies, rose to 84.367 from 83.959. 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. Germany, Spain, Portugal, Italy and France are all slated to sell debt this week, according to RBS. 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. "While the market has been taking a positive attitude to the bank-stress-test process so far, a number of press articles over the weekend cite risks regarding the European banking sector, which are likely to raise uncertainties once again," said strategists at BNP Paribas. U.K. data, Japan's elections The British pound (CUR_GBPUSD 1.5057, +0.0003, +0.0199%) declined to $1.5038 from $1.5067 Friday. 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 comfort Bank of England policy makers eager to keep interest rates on hold at a record low 0.5%, anticipating 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 weakened in Asian trading hours after the ruling Democratic Party of Japan lost more parliamentary seats than expected. The DPJ won just 44 seats, 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. In recent action, the yen recovered, with the dollar (CUR_USDYEN 88.6400, 0.0000, 0.0000%) buying ¥88.67, compared with ¥88.57 in late Friday action. It rose as high as ¥89.16 intraday. "The result of the election means a difficult passage for reform," said Adam Cole, global head of foreign-exchange strategy at RBC Capital Markets

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