Dollar mixed in narrow range
Greenback softens as investors' appetite for risk is revived on economic stimulus talk.
NEW YORK (CNNMoney.com) -- The dollar was mixed against rival currencies Thursday as concerns about the nation's banking sector vied with optimism surrounding the government's proposed economic stimulus program.
The euro slipped to $1.3138 from $1.3159 late Wednesday, while Britain's pound rose to $1.4647 from $1.4569.
Both the euro and the pound were under pressure earlier in the session as investors looked past the European Central Bank's widely expected interest rate cut to focus on turmoil in the banking sector. But the dollar began loosing ground during the afternoon as investors regained some appetite for more risky assets, such as the high-yielding pound and stocks.
Japan's yen, however, held its gains against the dollar. It rose 0.7% against the greenback to trade at ¥89.69.
The dollar's retreat came as new details emerged regarding a proposed $825 billion economic stimulus plan being debated in Congress. The package could provide roughly $550 billion in spending and $275 billion in tax cuts.
At the same time, concerns about ongoing turmoil in the banking sector were tempered by reports that Bank of America (BAC, Fortune 500) may get a government-backed guarantee of as much as $200 billion related to its purchase of Merrill Lynch.
Still, the grim outlook for the nation's banking industry "raises questions surrounding the use of the (hopefully) soon to be released second-tranche of TARP funds," said Sacha Tihanyi, currency strategist at Scotia Capital in Toronto, in a research note.
"It seems that the issue of concern is no longer so much liquidity but rather uncertainty over just what the true values of certain banks actually are," according to Tihanyi.
Separately, the European Central Bank cut its benchmark interest rate by half a percentage point to 2%, matching its lowest-ever rate as inflation plummets and recession spreads.
The move was widely expected and disappointed some investors who had anticipated a more aggressive move.
"The ECB is being looked upon as sort of dragging their heals," said Gareth Sylvester, senior currency strategist at the U.K.-based currency exchange brokerage HiFX.
"[ECB president] Trichet is focused more on inflation, which is not really a concern in the eurozone. The bigger issue at hand is growth prospects for euro zone." 
