NEW YORK (Dow Jones)-- Currencies continue to follow the lead of equity markets in early Tuesday in New York, with overnight drops in Asian equities driving down the dollar and euro against the yen.
The euro is up slightly against the dollar as positive economic news from Germany might be giving that currency a lift, according to Stuart Bennett, senior currency strategist at Calyon in London.
Investors are waiting for U.S. economic data to be released this morning. The data include the 9 a.m., EDT, release of the Case-Shiller Home Price Index and the 10 a.m., EDT, release of the Conference Board Consumer Confidence Index.
A consensus of economists expect home prices to come off slightly from their recent bottoms.
A drop in consumer sentiment could lead investors more strongly into the dollar, analysts said, as concerns over a shaky economic recovery would boost safe-haven currencies, such as the dollar and yen.
On the other hand, if consumer sentiment improves, investors could flock to the higher-yielding euro.
The euro traded early Tuesday at $1.4336 from $1.4299 late Monday, according to EBS via CQG. The dollar traded at Y94.21 from Y94.52, and the euro was at Y135.08 from Y135.15. The pound traded at $1.6401 from $1.6412 and the dollar was at CHF1.0583 from CHF1.0616.
Even though concerns still persist on whether a global economic recovery is forthcoming, the euro gained to an intraday high in early Tuesday trade. Some analysts attributed to Germany's return to economic growth in spring.
Final estimates of Germany's gross domestic product for the second quarter confirmed Tuesday. GDP rose 0.3% on the quarter in April-June, after a drop of 3.5% in the previous three months. After production data from Germany and France last week, analysts said the eurozone could be the first to exit from the economic calamity of the past year.
But, a governing member of the European Central Bank said the economic recovery still couldn't be considered certain.
Yves Mersch, governor of the Central Bank of Luxembourg, told the daily Wort that the recovery is too reliant on state support for consumption and on the rebuilding of inventories.
"Only a rise in global demand can sustain the recovery," Mersch told the paper. "Without, investment will not happen, and only through investment will new jobs be created. There is nothing like that in sight."
Analysts said the overall mood of global markets has been depressed by remarks from Chinese Premier Jiabao that monetary policy will stay loose because the economy faces new difficulties.
This appeared to inject fresh jitters into financial markets when concern about the global recovery was already on the rise.
In Japan, the Nikkei lost 0.8% on the day while in China the Shanghai Composite fell as much as 5.5% at one stage before rebounding just before the close to end down just 2.6%.
Canada Morning
The Canadian dollar is modestly higher Tuesday morning after slipping lower in response to weak stock markets overnight and then rebounding.
"We had a little bit of a wobble overnight," said Steve Butler, director of foreign exchange at Scotia Capital in Toronto.
An improved tone in equity markets in subsequent trading supported a rebound by the Canadian unit, he said. "People are really, really focused on the equity markets," Butler said.
