AFP - The euro dropped against the dollar on Tuesday after recent gains that were caused by relief that the bank stress tests brought no nasty surprises.
In morning trading here, the shared eurozone unit dropped to 1.2977 dollars, up from 1.2990 dollars in New York late on Monday.
Against the Japanese currency, the dollar strengthened to 87.36 yen from 86.86 yen on Monday.
The banking-sector stress tests published last Friday found that only seven European banks were under-capitalised, and by far less than expected, to face a new financial crisis.
The European Central Bank on Tuesday said that bank lending to the eurozone private sector picked up slightly in June, in a sign of sustained economic activity in the recovering 16-nation bloc.
Lending increased by 0.3 percent from the level in June 2009, a bank spokesman said, following a modest rise of 0.2 percent in May.
Growth of the ECB's M3 money supply indicator, which measures cash, deposits and other financial benchmarks, rose by 0.2 percent in June, the first increase since October 2009, after a slight rise initially reported for January was revised lower.
Lending and money supply data are indicators of consumer demand and overall economic activity.
"Overall, bank credit expansion remained subdued in June, due to ongoing supply-side factors (meaning bank balance sheet restructuring) and demand-side factors (meaning sluggish investment)," Barclays Capital economist Thorsten Polleit noted.
Earlier in Asian trading, the dollar moved narrowly against other currencies in the absence of fresh trading pegs, analysts said.
"There is no major news since the stress test," said Mizuho Corporate Bank market economist Daisuke Karakama said, referring to tests on European banks on whether they are strong enough to withstand any fresh financial crisis.
The Committee of European Banking Supervisors had on Friday said that only seven of 91 European financial institutions assessed by the authorities failed although the market remains suspicious of the rigour of the tests.
The yen was underpinned by dollar selling by Japanese exporters towards the end of the month but "rates will likely keep moving narrowly this week", Karakama said, adding the market was waiting for US jobless data due next week.
In trading in London, the euro changed hands at 1.2977 dollars against 1.2990 dollars on Monday, at 113.37 yen (112.83), 0.8394 pounds (0.8384) and 1.3738 Swiss francs (1.3621).
The dollar stood at 87.36 yen (86.86) and 1.0588 Swiss francs (1.0484).
The pound was at 1.5459 dollars (1.5486).
On the London Bullion Market, the price of gold rose to 1,184.25 dollars an ounce from 1,183.50 dollars an ounce on Monday.
