NEW YORK -- The dollar fell broadly Monday, failing to build on gains made last week after U.S. jobs data that was not as weak as expected, as investors decided the U.S. economy is still struggling.
The dollar had firmed on Friday after U.S. payrolls fell in April by a smaller-than-expected 20,000, while the jobless rate dipped to 5.0 percent. .
But further assessment of the data left investors wary of calling a sustained dollar recovery, with more economic and corporate fallout expected from the ongoing credit crunch that started in August last year.
"We continue to believe that there is ongoing downside risk to the U.S. economy," said Camilla Sutton, senior currency strategist at Scotia Capital in Toronto in a note to clients. "The housing market has yet to bottom, consumer confidence is at multi decade lows, employment growth has evaporated and high commodity prices are only exacerbating an already weak economic backdrop."
The dollar was down 0.1 percent on the day against a basket of six major currencies at 73.400, while the euro was up 0.2 percent at $1.5454, with traders citing a technical target of $1.5500 .
Story Continues Below
The euro shrugged off data showing euro zone investor morale had unexpectedly weakened in May, instead rising on the outlook for interest rates given the inflationary impact of higher oil prices as crude rose above $117 a barrel toward recent record highs.
The single currency is still some 3.5 percent below record highs seen last month at $1.6018.
The yen stayed weak against the euro as tentative risk appetite encouraged traders to borrow the low-yielding Japanese currency to buy high yielders, such as the Australian and New Zealand dollars.
The dollar fell 0.1 percent against the yen at 105.15 .
Trade in sterling was volatile, with the euro last up 0.4 percent at 78.54 pence, but still some way off record highs of 80.98 pence .
Trading was less active than usual due to public holidays in Britain and Tokyo,
Also weighing on the dollar was news that Microsoft Corp. dropped its bid for Yahoo Inc. , clouding the outlook for mergers and acquisitions.
"The market's focus today is Microsoft's withdrawal of its bid for Yahoo as the dispute over price left the deal unable to close," said Scotia's Sutton.
In other news, central bankers meeting at the Bank for International Settlements in Basel, Switzerland, said food price inflation was one of the most serious problems facing the world.
Investor focus now turns to U.S. service sector data due at 10 a.m. (1400 GMT) which is expected to show a decline in the sector. Some analysts said expectations for the U.S. Federal Reserve to pause in its aggressive rate cutting cycle after last week's rate 25 basis point easing to 2 percent might prove premature.
© Reuters 2008. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters.
Editor's note:
Turn the Recession into 25% Profits by New Year's Eve
The Hidden Upside of the Recession
20 Financial Institutions Most at Risk From Mortgage Meltdown
Max Shows You How to Profit From $100 Oil
