Dollar, Yen Fall as Money Moves into Stocks

The dollar fell against the euro on Monday and the yen weakened as a rise in oil prices and U.S. stocks reduced safe-haven demand for both currencies.

Comments from China, the single biggest holder of Treasurys, ruling out sudden changes in its foreign exchange reserve policy bolstered the dollar versus the yen earlier in the day. But currency traders switched their focus to the surge in crude oil prices and a rise in equities as the session progressed.

"Commodities are really the big story of the day. We've had the Nigerian oil field attack, which has seen oil spike and that's really driven up the stock market," said Dan Cook, market analyst at IG Markets in Chicago. "With stocks up, investors are selling the dollar against the euro especially. The yen is also down sharply with equities trading higher."

Oil prices rose nearly 4 percent on Monday, lifted by word of fresh rebel attacks on oil installations in Nigeria and gains in equity markets.

Nigeria's main militant group said its fighters had attacked an oil facility belonging to Royal Dutch Shell in the Niger Delta on Monday, days after President Umaru Yar'Adua proposed an amnesty.

The euro rose against the dollar to near $1.40. The dollar was up versus the yen at about 96.

The euro was also up versus the yen, gaining about 1 percent to near 135.

The China news earlier also was a positive factor for the dollar. Chinese officials said at a meeting of central bankers in Basel at the weekend that the policy governing its currency reserves, which comprise mainly U.S. Treasurys, was stable and consistent with no "sudden changes," giving the dollar some respite.

Some analysts though were not buying China's comments.

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"I don't really believe in what China said (earlier). I don't think their politics is in line with their best interests," said Melvin Harris, currency strategist at Advanced Currency Markets in New York. "China has way too much dollar debt. They're going to have to diversify in order to manage risk successfully."

The dollar had come under pressure recently as debate intensified about the use of an alternative global currency to the greenback, with China's central bank renewing its call for a super-sovereign reserve currency last week.

Overall, analysts said currency movements would remain subdued ahead of U.S. payrolls data for June and comments by the European Central Bank and Sweden's Riksbank expected later this week after their monetary policy meetings.

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