Dollar falls amid weak European data

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NEW YORK (CNNMoney.com) -- The dollar fell against the euro and the yen Monday as traders appeared to brush off reports of weak consumer confidence in Europe and a record 2009 budget deficit.

The euro bought $1.5745 Monday, up from $1.5710 late Friday. The dollar fell against the yen to ¥107.51 from ¥107.78. The British pound was largely unchanged at $1.9941 compared to $1.9918 late Friday.

Traders largely shrugged off news of a drop in consumer confidence in Germany, noted Nick Bennenbroek, head of currency strategy at Wells Fargo. Consumer confidence has fallen to a more-than five-year low there.

Typically, that would pressure the euro because it signals that consumers in Europe's biggest economy are afraid to spend as much. But Bennenbroek said the information had been expected due to the release of various business confidence measures.

"The drop in consumer confidence in Germany was a restatement of other indicators that point to a slower European economy, so it wasn't having an effect on currency markets," he said.

The U.S. consumer confidence report is due Tuesday.

News that the next U.S. president will inherit a record budget deficit of $482 billion is important, but it won't have an immediate impact on the dollar, according to Kevin Chau, a foreign currency analyst with IDEAGlobal.

The Bush administration's estimate released Monday will "be important down the road, but the market needs to digest the information more," he said. Chau added that whenever a government runs a huge deficit, it has a negative impact on the value of its currency.

But several other important economic reports due later this week could have a big impact on the dollar, according to Chau - especially July's employment report.

"Everyone's waiting for payroll numbers. If they come out worse than expected, the knee jerk reaction will be a selling of the dollar," he said.

Bennenbroek thinks the dollar will grow weaker this week based on jobs and manufacturing surveys out Friday.

"The most important events will happen later this week. Payroll is expected to decline, and manufacturing to go weak. The moves we're seeing are more to the downside, toward dollar weakness," Bennenbroek said.

Stephen Malyon, a currency analyst with Scotia Capital said that the reports expected this weak will likely shift the focus from a slowdown of the European economy to the situation at home. And the attention - likely negative - may cause the dollar to fall.

Oil: Crude ended the day up $1.47 to settle at $124.73/barrel on the New York Mercantile Exchange as tensions in the oil-rich countries of Nigeria, Iran prompted supply concerns that overshadow declining demand.

Stocks: The Dow sank 240 points, falling 2.1% as continued bank troubles and prospects of worsening economic conditions spooked investors