Dollar weakens as stocks rebound

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- The dollar eased against its main trading partners Monday, as stocks recovered and an auction of Greek bonds received strong demand.

What prices are doing. The dollar was down versus the euro at $1.4153 and fell against the British pound to $1.6253. The buck also edged lower against the Japanese yen to ¥90.24.

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What's moving the market. The euro was supported by reports Friday that a auction of Greek government bonds received stronger-than-expected demand. The results eased some worries about the credit problems facing Greece and other ailing European economies.

The dollar, which is considered a safe haven, came under pressure as stocks recovered from last week's steep selloff despite a weaker-than-expected housing market report.

The National Association of Realtors said sales of existing homes fell 16.7% to a 5.45 million unit annual rate in December from a rate of 6.54 million units in November. Economists surveyed by Briefing.com thought it would fall to a 5.9 million unit rate.

Traders are also focused on the Federal Reserve, which kicks off a two-day policy meeting Tuesday. The Fed is widely expected to vote to hold interest rates steady at historic lows near 0%.

The meeting comes amid some uncertainty about Ben Bernanke's appointment to a second term as chairman of the central bank. If the Senate does not confirm Bernanke by Jan. 31, Vice Chairman Donald Kohn will become acting Fed Chairman until another nominee is confirmed.

In addition to the Fed meeting, the week brings a preliminary reading on fourth-quarter GDP growth, President Barack Obama's State of the Union address and profit reports from a host of major U.S. companies.

Investors are also digesting plans announced last week by the Obama administration to increase regulation in the banking sector.

What analysts are saying. The dollar could come under pressure later this week if the Senate fails to approve Bernanke's appointment, analysts at Sucden Financial Research wrote in a report.

"With his term officially expiring at the end of January, any further delays could undermine the dollar next week," the report said. "The U.S. currency would be likely to spike lower if his nomination is rejected."

But the dollar could strengthen if Friday's GDP report comes in better than the 4.6% growth rate forecast by economists surveyed by Briefing.com.

"Should GDP surprise higher it would lend support to the U.S. dollar," Camilla Sutton, a currency analyst at Scotia Capital wrote in her daily report.  To top of page

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