NEW YORK -- The dollar weakened against most of its major competitors Tuesday, as improved investor sentiment sent global stock markets and commodities higher, leading investors away from the low-yielding dollar.
Higher-yielding, commodity-backed currencies, such as the Australian and New Zealand dollars, were the biggest beneficiaries of the improved sentiment, both increasing nearly 1% against the U.S. dollar in early New York trading.
The euro eked out a slight gain against the dollar as euro zone finance ministers tried to reassure markets Greece's fiscal concerns would be kept under control, but the common currency still faces strong headwinds as investors determine whether Greece can implement belt-tightening budgets.
"Gradual demonstration by Greece that it is willing and able to meet its fiscal responsibilities and hold to its plan of fiscal austerity seems to be the only thing that can provide the market with comfort," said Sacha Tihanyi, currency strategist at Scotia Capital in Toronto.
Early Tuesday, the euro was at $1.3663 from $1.3601 late Monday dollar was at 89.96 yen from 89.98 yen, while the euro was at 122.93 yen from 122.36 yen. The U.K. pound was at $1.5677 from $1.5661. The dollar was at 1.0739 Swiss francs from 1.0769 francs.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 80.075 from 80.366.
Strong earnings data from U.K. banking giant Barclays helped boost appetite for risk, as the bank reported profits had doubled in 2009 from a year earlier.
Also giving the euro a small boost was the ZEW economic expectations index in Germany, which ticked down, but stayed well above economists' expectations.
The "report is significant in that it perhaps indicates that the depth of pessimism currently embedded in market sentiment has gone a little too far," said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Conn.
Investors have punished the euro over issues of stressed sovereign debt in Greece, which threaten to spill over into Portugal and Spain, but financial markets shouldn't doubt the willingness of the European Union to help Greece overcome its budget problems, French Finance Minister Christine Largarde said Tuesday.
"The declaration last Thursday by the heads of government was very clear," Ms. Lagarde said, stressing the body's political support for Greece.
Euro zone governments announced Monday that the Greek government will have to produce its first report on compliance with the plan March 16.
Elsewhere, the U.K. reported that inflation jumped to 3.5% last month from 2.9% in December. This wasn't as high as the 3.7% that the consensus had expected and has helped to lower expectations that the Bank of England will have to raise rates this year, said Tullett Prebon analysts.
U.K. Chancellor of the Exchequer Alistair Darling said he also made clear the government recognized the need for fiscal tightening in the years ahead, something that would damp inflation pressures over time as the economy recovered.
"The BOE's tolerance for inflation and the systemic vulnerability of the highly leveraged domestic economy mean that sterling will remain pressured," said Lena Komileva, head of Group of 7 market economics at Tullett Prebon in London.
The pound had gained around 0.10% in early New York trading.
The Canadian dollar was moderately higher Tuesday morning as it benefits from a stronger appetite for risk among investors. The U.S. dollar was trading at C$1.0452 from C$1.0489 late Monday. The greenback hit a session low of C$1.0443 in recent trading, its lowest level since Jan. 21, according to EBS.
On Monday morning, Canadian Finance Minister Jim Flaherty announced measures to tighten mortgage lending in Canada, including lowering the maximum amount Canadians can withdraw in refinancing mortgages to 90% from 95% of the value of their homes.
Canada's reputation for a more cautious approach to borrowing may be enhanced by changes announced by Mr. Flaherty on Monday morning, said a report from TD Securities.
The Canadian dollar remains a clear outperformer among the major currencies, bettered only by the yen in the year-to-date performance stakes, TD said.
