The dollar rose against the yen but fell against the euro on Monday as U.S. and European stock markets rose and investors took on more risk, though worries about the U.S. banking sector kept market optimism contained. A bevy of central bank meetings this week prompted caution, though the euro erased losses seen after European Central Bank council member Axel Weber said top euro-zone economy Germany won't resume growth until the second half of 2010. Analysts said some investors were nervous that Thursday's stress test results for 19 top U.S. banks may reveal that some of the largest need more capital. But the anxiety wasn't strong enough to squelch risk-taking altogether, as stocks and high-yield currencies rallied. Strong Chinese data lifted sentiment, as did a report showing pending U.S. home sales rose 3.2 percent in March. "Looks like we have stability in the housing market," said Joseph Trevisani, chief market analyst at Saddle River, New Jersey-based FX Solutions. "When that starts, everything else in the economy can begin to recover." Trading was volatile, with Britain and Japan closed for holidays, and traders said that contributed to some of the price swings. The euro was up 0.6 percent at $1.3340, off a session low of $1.3312, and rose 0.8 percent to 132.50 yen. The dollar rose 0.4 percent to 99.42 yen. Sterling rose 0.3 percent to $1.4958 while the Australian dollar, boasting the highest interest rates among developed currencies, traded near a seven-month high against the greenback at $0.7385. The data "have furthered the notion that the worst of the crisis is behind us," said Omer Esiner, senior market analyst at Ruesch International in Washington. "The subsequent rise in risk appetite has benefited equities and has undermined demand for the greenback and the yen as a safe haven." But analysts said a clearer indication of economic and market conditions would come this week, with the bank stress tests and the European Central Bank meeting on Thursday of particular interest. The ECB is expected to cut rates to 1 percent and possibly announce further steps, such as buying securities, to stimulate lending and growth. Central banks in Britain, Norway and Australia also meet this week "ECB officials have been candid in talking about their differences in public, and Thursday is really D-Day for them," said UBS currency strategist Brian Kim. He said any indication that the bank will follow the U.S. Federal Reserve and others and embrace quantitative easing -- the process of flooding a banking system with money to boost lending -- would likely weigh on the euro.

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