By Laura Mandaro
The U.S. dollar slid against its major counterparts Monday as
the possible bankruptcy of General Motors Corp. and an upcoming
slew of bank earnings weighed on U.S. stocks, the main driver for
the greenback on a data-light day.
The dollar index (DXY), a measure of the greenback against a
trade-weighted basket of currencies, fell to 84.735 from 85.428
before the start of U.S. stock trading. The index has fallen about
0.7% since Friday but is still 4.4% higher for the year.
Trading conditions were thin. Most major European financial
markets were closed due to the Easter Monday holiday.
U.S. stocks fell Monday as some investors cashed out after
Thursday's 246-point surge in the Dow Jones Industrial Average, the
first stock trading day after the Easter long weekend. The
blue-chip average (DJI) fell more than 100 points, and was recently
down 1.3% to 8,083 points. The S&P 500 (SPX) lost 0.9% to trade
at 857 points.
"On a day like today, with really no economic news, people are
paying a little more attention to U.S. stocks," said Jeff Sakamoto,
an interbank trader with Union Bank of California.
But he said traders were probably cautious about taking on big
positions ahead of earnings reports from U.S. banks. Starting with
Goldman Sachs Group, Inc. (GS) earnings Tuesday, profit reports
from the biggest financial institutions - including J.P. Morgan
Chase & Co. (JPM) and Citigroup, Inc. (C) and Morgan Stanley
(MS) are expected to determine whether U.S. stocks can hang on to
five weeks of gains.
The euro extended gains versus the greenback, rising 1.3% to
$1.3355. The British pound also too more ground, rising 1.2% to
$1.4833.
The dollar reversed earlier gains against the Japanese yen to
fall 0.2% to 100.08 yen.
The U.S. Treasury is directing General Motors (GM) to lay the
groundwork for a bankruptcy filing by a June 1 deadline, despite
GM's public contention that it could still reorganize outside
court, The New York Times reported Sunday.
The preparations are aimed at ensuring that a GM bankruptcy
filing is ready if the company is unable to reach agreement with
bondholders to exchange roughly $28 billion in debt into equity in
GM and to get needed concessions from the United Auto Workers
union, the report said.
Strategists at Brown Brothers Harriman said the report was a
"catalyst" for the euro's early bounce.
The dollar has tended to gain ground on rising economic fears
and financial-sector turmoil as investors flee assets perceived to
be risky, prompting flows back into the dollar. The greenback has
tended to lose ground when risk appetite is on the rise.
"The market takes a break from policy this week and turns its
focus to credit indicators and U.S. earnings," wrote Jessica
Hoversen, a Chicago-based currency strategist at MF Global, in a
research note.
"U.S. earnings will remain paramount as the market continues to
gauge the health of the economy," she said.