WORLD FOREX: Dollar Bounces Back Vs Euro From One-Month Low

NEW YORK (Dow Jones)--The dollar recovered all its intraday losses against the euro Tuesday, bouncing back from a one-month low, as U.S. stocks declined.
Dropping stocks usually support the U.S. currency as traders reverse riskier bets back into the major funding currency of those positions.
The euro recently fell to an intraday low of $1.3318, after earlier hitting its highest level in one month, $1.3439.
Improving economic fundamentals have been encouraging traders to take on more risk, but caution has prevailed in afternoon New York trade, marked by relatively thinner markets after the exit of European desks.
Currency traders are taking profits on intraday moves ahead of the European Central Bank meeting on Thursday, the same day the U.S. government is expected to release the results of the banking stress tests. In addition, on Friday, the latest U.S. payrolls report will be released - and economists aren't expecting any positive news.
Tuesday afternoon in New York, the euro was at $1.3339, from $1.3405 late Monday, while the dollar was at Y98.87, from Y98.93. The euro was at Y131.86, from Y132.60. The U.K. pound was at $1.5085, from $1.5005 late Monday, while the dollar was at CHF1.1315, from CHF1.1275.
Nevertheless, there were signs Tuesday of normalization in the market. The euro, while down on the day, remains inside its recent range against the dollar, in which it has been mounting a comeback over the last couple weeks.
Libor moved below 1% Tuesday for the first time. Federal Reserve Chairman Ben Bernanke said U.S. economic growth is likely to resume later this year and said the weakened housing market appears to be reaching a bottom. Moreover, a report on activity in the U.S. service sector shrank less steeply than expected in April.
Along with the euro's earlier gains, as traders pushed forward riskier positions, the U.K. pound hit a four-month high of $1.5161 and the Australian dollar hit a seven-month high of $0.7479.
-By Riva Froymovich, Dow Jones Newswires; 201 938-5063; riva.froymovich@dowjones.com