By William L. Watts and Lisa Twaronite, MarketWatch
LONDON (MarketWatch) — The U.S. dollar shook off recent weakness to score modest gains against major rivals Tuesday as oil prices pulled back from 29-month highs on reports that more countries may move to boost production.
Oil also weakened on reports that Moammar Gadhafi may be looking for a way to exit Libya. Nymex crude oil for April delivery trimmed its earlier loss but was lately down 28 cents to $105.16 a barrel. Read about Gadhafi and oil futures.
The dollar remained supported after crude’s decline appeared to spark a round of dollar short-covering, wrote strategists at RBC Capital Markets.
The dollar index (DXY 76.76, +0.26, +0.34%) , which measures the U.S. unit against six currencies, traded at 76.678, up from 76.488 in North American trade late Monday.
The euro (EURUSD 1.3909, -0.0070, -0.5011%) bought $1.3923, compared with $1.3972 in late North American trading Monday.
Euro bulls have had difficulty keeping the 17-nation shared currency above the $1.40 level, despite the boost provided last week by European Central Bank President Jean-Claude Trichet’s signal that interest rates could soon rise. See real-time currency quotes and tools.
Worries that rising tensions on the euro-zone periphery could eventually trump rate expectations may leave bulls reluctant to press the euro above $1.40, strategists said, particularly as investors await a March 11 meeting of heads of state of euro-zone nations.
The euro has recently shrugged off fiscal problems on the periphery of the euro zone on expectations that politicians will reach agreement to overhaul the region’s rescue fund and fiscal reforms, said Jane Foley, senior currency strategist at Rabobank.
“This may be so, but there are no guarantees that this will be achieved without some haircuts for some bond holders; Germany is, after all, playing hard ball,” she said.
While the U.S. is battling fiscal problems that could weigh heavily on the greenback over the medium term, euro/dollar could suffer a near-term pullback or, at least, some consolidation, Foley said.
The British pound (GBPUSD 1.6154, -0.0049, -0.3025%) slipped to $1.6183 from $1.6205 late Monday as the dollar saw broad gains.
Against the Japanese yen, the dollar (USDYEN 82.5700, +0.2900, +0.3527%) bought ¥82.53, up from ¥82.28 late Monday.
