By William L. Watts and Myra P. Saefong, MarketWatch
LONDON (MarketWatch) -- The U.S. dollar was lower versus most major rivals Tuesday, with the euro finding support after an auction of Irish government debt met solid demand.
The dollar index (DXY 82.26, -0.27, -0.33%) , a measure of the greenback against a basket of major currencies, traded at 82.213, compared with 82.535 late Monday.
The euro (EURUSD 1.2865, +0.0043, +0.3354%) rose to $1.2859, up from $1.2813 late Monday and one euro bought 110.14 Japanese yen, up from ¥109.30.
The euro extended an early gain versus the dollar after Ireland's National Treasury Management Agency said it sold 1.5 billion euros ($1.9 billion) of government bonds, the maximum amount on offer.
Nervousness over the auction had mounted in recent days amid upward pressure on Irish bond yields and sovereign credit-default swaps due to concern about the cost of bailing out the nation's financial sector.
The auctions produced strong demand, however, with bids for the sale of €500 million of April 2014 bonds exceeding the amount on offer 5.4 times.
"Euro-zone government bond auctions passed without incident and regional equity markets are trading firmly in positive territory, though the ZEW survey result shows that the currency union will find it challenging to maintain rosy growth conditions," said Geoffrey Yu, currency strategist at UBS.
An unexpected dip in the ZEW economic sentiment indicator for Germany had little lasting impact on the single currency. Read about the fall in the August ZEW index.
"The euro appears to have found support near the $1.2700 level and may now stage a recovery rally back towards $1.3000, especially if the data continues to confirm the buoyant conditions in the core economies of Germany and France," said Boris Schlossberg, director of currency research at GFT.
"Next week, the much more important [German] IFO survey along with the PMI data from the key euro-zone countries should provide investors with much better information regarding the strength of the recovery in the region," he said.
The British pound (GBPUSD 1.5628, -0.0025, -0.1597%) was down 0.2% versus the U.S. dollar at $1.5609.
The Office for National Statistics said annual July consumer-price inflation slowed to a 3.1% pace from 3.2% in June, in line with expectations. The rate remains more than a full percentage point above the BoE's 2% annual target, which required BoE Gov. Mervyn King to write an explanatory letter to Chancellor of the Exchequer George Osborne.
King repeated that the central bank expected inflation to fall below target over the two-year forecasting period but emphasized the central bank stood ready to tighten or loosen monetary policy as needed. Read about British inflation.
Against the yen, the dollar (USDYEN 85.3500, +0.0200, +0.0234%) traded at ¥85.32, little changed from ¥85.33 in late North American trading Monday. Last week, the yen hit a 15-year high against the dollar. Read Asia Markets column about the appreciation of the yen and gold.
