Dollar rebounds in New York

The dollar rebounded on Monday from last week's sharp decline against the euro, but a strong bearish stance toward the greenback is expected ahead of next month's US debt limit debate. Disparities in global central bank monetary policy will not help the currency.
The dollar found support after a US government shutdown was averted on Friday and the currency's rise was widely viewed as overdue after its sell-off versus the euro for the last four months. So far in April, the dollar is still down more than 2 percent. Interest rate differentials between Europe and the United States, however, are expected to continue to support the euro following the European Central Bank's 25-basis-point rate increase last week. The US Federal Reserve is widely expected to keep rates low until late this year or early 2012.
While the Commodities Futures Trading Commission's latest report showed a narrowing of the net short USD position to $30 billion, it was only because of a build in short yen positions. All other currencies are net long against the dollar. The dollar index, which tracks the greenback against a basket of currencies, was flat at 75.054, but only slightly above the 16-month low of 74.84 set on Friday.
In late afternoon New York trading, the euro fell 0.3 percent to $1.4430 after hitting a 15-month high around $1.4486 on Friday. The high on electronic trading platform EBS was $1.4485. The dollar's negative tone should remain in place as long as the Federal Reserve keeps interest rates low and while central banks abroad, namely the ECB and Bank of England, move closer to more normal borrowing costs, she said.
Risk reversals for one-month euro/dollar options are still showing a solid bias for "puts" this year, though the currency has rallied 8 percent so far in 2011. Inflation data, meanwhile, could potentially sway currency sentiment this week, with Germany, Spain, Hungary, Sweden and the United Kingdom all releasing reports on Tuesday. In the United States, inflation data will be released on Thursday and Friday.
The United States is $95 billion away from reaching the statutory $14.3 trillion ceiling, according to the latest data. The euro was down 0.5 percent at 122.10 yen after trading as high as 123.33 yen earlier on trading platform EBS. The Australian dollar was down 0.3 percent at 89.15 yen, having scaled a high of 90.04 yen, its strongest since September 2008.