By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- The U.S. dollar edged lower versus most major currencies in range-bound trade on Monday, pressured amid signs investors' appetites for riskier assets remain on the rise, analysts said.
The dollar index (DXY 78.58, -0.20, -0.25%) , which tracks the greenback against a trade-weighted basket of major currencies, slipped to 78.569, down from 78.737 late Friday.
The euro traded at $1.4257, up from $1.4224 in North American trade late Friday. The British pound bought $1.6506, up slightly from $1.6441.
The Japanese yen was on the defensive. The U.S. dollar bought 95.17 yen, up from 94.84 yen late Friday.
U.S. equity markets opened lower, with a second day of mixed earnings reports from companies including Aetna kept a lid on recent gains. Crude oil futures rose 0.34.
The Standard & Poor's 500 Index (SPX 977.60, -1.66, -0.17%) declined 0.1% in early trading.
On Monday, Aetna (AET 25.01, -1.43, -5.41%) cut its earnings outlook for the second time in two months and Honeywell International (HON 34.00, +0.01, +0.03%) said it expects low end annual earnings.
"With a growing feeling that the worst of the recession is now over, it may take something drastic to drag traders back to the safe-haven trade," said James Hughes, a strategist at CMC Markets.
The dollar and the Japanese yen have tended to benefit from safe-haven flows when equities fall, while losing ground as stock markets rise.
This week's upcoming issuance of $115 billion in U.S. government debt, however, could spark some market jitters if the supply isn't well-received, Hughes said. See Bond Report.
Currency-related commodities continued to rise, with the Australian dollar gaining 0.9% versus its U.S. counterpart to fetch 82.46 U.S. cents. The greenback fell 0.7% versus the Canadian dollar to trade at C$1.0782.
The bullish tone in equity markets makes it "hard to argue against being long pro-risk, [but] we doubt that the flurry of buying can continue without retracement," wrote Kenneth Broux, market economist at Lloyds TSB, in a research note.
U.S. second-quarter GDP data is set for release Friday and is likely to show output fell at a 1.2% annualized rate in the three months ending on June 30, marking the fourth consecutive quarter of negative annual GDP growth, according to economists surveyed by MarketWatch. See U.S. Economic Preview.
Data set for release Monday is expected to show U.S. sales of new single-family homes rose by around 4.5% in June to a seasonally adjusted annual rate of 358,000 from 342,000 in May, according to a survey of economists by MarketWatch.
Also Monday, U.S. and Chinese officials began meeting for two days of economic talks, though many analysts questioned whether anything substantial would emerge. See full story on U.S.-China talks.
"U.S. and Chinese officials meet today and tomorrow for the first high-level talks of the Obama administration. The market will be on alert for any commentary regarding the U.S. dollar's status as a reserve currency," said Sue Trinh, senior currency strategist at RBC Capital Markets.
China will likely resist any pressure to let the yuan strengthen and instead follow its own timetable for currency appreciation, analysts said Monday. See Asia Markets.
Treasury Secretary Timothy Geithner on Monday tried to reassure his Chinese counterparts that the federal budget deficit would be cut to a sustainable level by 2013, recognizing that China's central bank holds an estimated $1.2 trillion worth of U.S. dollar assets. Chinese officials have unanimously criticized the buildup in the U.S. deficit and the Federal Reserve's expansionary monetary policy.
