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By Vivianne Rodrigues
NEW YORK, April 7 (Reuters) - The dollar advanced against
the yen and euro on Monday as stabilizing financial markets
raised optimism that the worst of the financial crisis might be
over, encouraging some investors to buy riskier assets.
Analysts said the dollar also got some support as traders
were reluctant to buy the euro ahead of the European Central
Bank policy meeting on Thursday and the G7 nations' gathering
late in the week.
While sentiment toward the dollar had improved, worries
about the overall health of the U.S. economy continued to cast
a pall over the market, restricting the greenback's gains, they
said. Data on Friday showed the economy shed jobs again in
March for a third straight month.
"The dollar has been trading on a tight range against the
euro and with the G7 and the ECB meetings later this week, I
wouldn't expect significant moves in the currency," said Greg
Salvaggio, a currency trader at Tempus Consulting in Washington
D.C. "At the same time, the situation in the financial markets
seems to be more stable now and that is also giving the dollar
a lift."
In late afternoon trading the euro was down 0.2 percent at
$1.5705 <EUR=>. The dollar gained 0.9 percent against the yen
to 102.42 yen <JPY=>, after earlier spiking to 102.85 yen.
ECB, G7 MEETINGS
The dollar's strong gains overnight were also sparked by
reports of Japanese pension funds buying overseas assets as
they start their new financial year, said Jon Gencher, director
of FX sales at BMO Capital Markets in Toronto.
"In addition, lending support to both the dollar and U.S.
equity markets were reports that China would allow its
commercial banks to invest in U.S. stocks and mutual funds as
it seeks to widen its overseas investment program," said
Gencher.
"Sentiment has certainly improved, but we are not out of
the woods yet. There are still some ongoing concerns that will
continue to hang over the markets."
Central bankers and finance ministers from the Group of
Seven rich nations meet in Washington later this week and are
expected to discuss a broad range of proposals aimed at
restoring confidence in the battered banking system.
These measures, ranging from increasing transparency to
strengthening authorities' oversight powers, are seen as
boosting the dollar, which has been pressured by aggressive
monetary easing by the Federal Reserve.
"Ahead of the G7 and ECB (meetings), people are not going
to get aggressive in terms of buying the euro," said Brian
Dolan, chief currency strategist at Forex.com in Bedminster,
New Jersey. "Nobody really knows what, if any, protest ECB
(President Jean-Claude) Trichet will offer for the strength of
the euro. Clearly, they are not pleased with it."
The Fed has slashed its benchmark overnight lending rate
by 3 percentage points to 2.25 percent since mid-September,
wiping out the dollar's yield advantage against the euro.
The ECB is widely expected to leave its key rate on hold
at 4 percent, while the Bank of England, which also meets on
Thursday, is seen cutting rates a quarter percentage point to 5
percent.
(Additional reporting by Lucia Mutikani; Editing by Chizu
Nomiyama)
