Dollar falls

The dollar fell on Monday as fears of woes in the US financial sector persisted even as Bank of America reported better-than-expected results. The greenback gained earlier against the yen after Bank of America's second-quarter earnings beat analysts' forecast. But investors remained wary ahead of a flurry of bank earnings due this week, including Wachovia on Tuesday.
The market also focused on a rescue plan for troubled US mortgage finance giants Fannie Mae and Freddie Mac. "There was a lack of follow-through buying in the dollar after the Bank of America results," said Steven Butler, director of foreign exchange trading at Scotia Capital in Toronto. "The bank's results were less worse, but concerns in the financial sector remain," he said.
In late afternoon trading, the euro was last up 0.3 percent to $1.5898, below last week's record high of $1.6037 according to Reuters Dealing. Against the yen, the dollar slipped 0.2 percent to 106.69 yen, while the euro hit a record high at 169.64 yen, according to electronic trading platform EBS.
Wall Street stocks closed lower on Monday after trading higher earlier in the session, while oil prices rallied, further dampening sentiment toward the greenback. A slide in the index of US leading indicators last month also weighed on the dollar, analysts say.
That index is signalling "further economic deceleration coming in the next three to six months," said Michael Woolfolk, a senior currency strategist at The Bank of New York Mellon in New York.
The dollar regained some strength last week after confidence in the US financial sector, hit hard by the nearly year-old credit crunch, was boosted somewhat following better-than-expected results from Citigroup, J.P. Morgan Chase and Wells Fargo.
Troubles at Fannie Mae and Freddie Mac were also back on traders' radar screens this week. US Treasury Secretary Henry Paulson said on Sunday he was optimistic Congress would approve the government's request for authority to shore them up.
"The dollar will remain sensitive to stock prices and earnings releases while we await the legislative outcome of the pending GSE reform and housing bill," Woolfolk added. An analyst at Friedman Billings Ramsey said Fannie Mae and Freddie Mac will need to raise $10 billion to $15 billion each, and expects stocks in both government-sponsored enterprises to see continued volatility until they raise fresh capital.