By Deborah Levine and William L. Watts, MarketWatch NEW YORK (MarketWatch) -- The dollar fell further against the euro for a third session on Monday, as U.S. stocks added to gains after a report showed sales of U.S. new homes rebounded in June by more than economists had forecast. The euro posted gains earlier in the session as investors continued to be satisfied with the results of the stress tests conducted on major European banks. The dollar index (DXY 82.37, -0.10, -0.12%) , which tracks the greenback against a basket of major currencies, fell to 82.285 from 83.493 in North American trading late Friday. The euro (CUR_EURUSD 1.2927, +0.0026, +0.2015%) held within its recent trading range, rising to $1.2945 from $1.2916 Friday. Meanwhile, the dollar lost ground versus the Japanese yen (CUR_USDYEN 87.2600, -0.2100, -0.2401%) to ¥87.30, paring an earlier loss but still down from ¥87.44. The euro rose to fetch ¥113.01, up from ¥112.11. The British pound (CUR_GBPUSD 1.5459, +0.0045, +0.2919%) rose to $1.5479 from $1.5425. Sterling briefly topped $1.55. The dollar has lately fluctuated between responding positively to good U.S. economic news and reacting to stocks as an intervening measure of investors' appetite to shift out of the relative safe-haven of the greenback and into riskier assets, including stocks. "The bigger question is now risk-on or risk-off rather than stress tests," said strategists at Citi. The S&P 500 Index (SPX 1,108, +5.64, +0.51%) rose 0.5% in recent action. U.S. new home sales rebounded in June after falling to all-time low in May, the Commerce Department estimated Monday. The increase in new-home sales to a seasonally adjusted annual rate of 330,000 was well above the 316,000 pace expected by economists surveyed by MarketWatch. Read about new home sales. Reports due out this week are expected to be on the weak side, showing consumer confidence this month slipped and second-quarter growth actually slowed from the first quarter. Read about upcoming economic reports. The stress tests on European banks found that seven of the 91 banks that were examined failed to have enough capital to withstand a scenario of losses on sovereign debt. Read about the test results. "The response to the tests has been remarkably calm," said Andrew Wilkinson, strategist with Interactive Brokers in Greenwich, Conn. The results offered few surprises, with no major banks falling short. Economists and analysts have criticized the tests for a lack of rigor on a number of fronts. Strategists at UBS in Zurich questioned the sustainability of the euro's recent rebound in the face of plans for substantial fiscal consolidation across the euro zone. The euro has climbed back from a four-year low set below $1.19 at the end of last month. "We expect the euro will face renewed downward pressure on concern over relative growth prospects. Also, Friday's stress-test results are unlikely to provide any significant support given lingering concerns over a European banking system that is manifestly still reliant on [European Central Bank] liquidity," they wrote.

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