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 84.526 in late North
American trading from 85.428 before the start of U.S. stock
trading.
The index has fallen about 0.2% since Friday but is still 4.1%
higher for the year.
Trading conditions were thin. Most major European financial
markets were closed due to the Easter holiday Monday.
Directing currency trading, U.S. stocks spent most of the day in
the red, weighed down by worries about GM's future and the upcoming
raft of bank earnings.
"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. Profit reports
from the biggest financial institutions -- including Citigroup Inc.
(C), J.P. Morgan Chase & Co. (JPM) and Morgan Stanley (MS) are
expected to determine whether U.S. stocks can hang on to five weeks
of gains.
The dollar remained largely unchanged after Goldman Sachs Group
(GS) released earnings late Monday, surprising investors who
expected the release Tuesday morning. The brokerage said it was
issuing $5 billion in stock to pay back government-bailout funds.
Earnings in the first quarter rose to $3.39 a share, topping
estimates.
The euro extended gains vs. the greenback, rising 1.4% to
$1.3363. The British pound also took more ground, rising 1.3% to
$1.4842.
The dollar reversed earlier gains against the Japanese yen to
fall 0.2% to 100.04 yen.
U.S. stocks spent most of the day in the red, though two of the
three benchmark indexes managed to eke out modest gains by the
close.
On the first stock trading day after the Easter long weekend,
the Dow Jones Industrial Average (DJI) closed down 26 points, or
0.3%, at 8,058. The S&P 500 (SPX) gained 2 points, or 0.3%, to
close at 859. The Nasdaq Composite Index (RIXF) also ended modestly
higher.
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."