The dollar fell against the euro Monday after a speech by European Central Bank President Jean-Claude Trichet indicated to investors that higher interest rates are likely in Europe. The U.S. currency was mixed in other trading.
Investors already expected that the European Central Bank will raise rates when they meet next month. However, Trichet's speech on Monday reinforced the idea and helped push the euro higher against the dollar, said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto.
Central banks raise interest rates to help counter inflation, and higher rates on government bonds tend to increase demand for the currency linked to that country or region.
The euro rose to $1.4097 Monday from $1.4073 late Friday.
The dollar rose to 81.70 Japanese yen from 81.41 yen late Friday. Concerns about contamination in Japan continued as officials said radiation was seeping into the soil and seawater outside the Fukushima Dai-ichi power plant which was crippled by an earthquake and tsunami more than two weeks ago.
In the U.S., the government and a private trade group released economic data on consumer spending and the housing market that suggested a strengthening economy. The Commerce Department said Americans earned more and spent more money in February thanks to a tax cut. Consumer spending jumped 0.7 percent in February while personal incomes rose 0.3 percent.
Meanwhile, the National Association of Realtors said more Americans signed contracts to buy homes in February, with sales rising in every region but the Northeast. However, the National Association of Realtors' pending home sales index moved up to 90.8, still below 100 which is considered the healthy level.
In other trading Monday, the British pound fell to $1.6000 from $1.6019, while the U.S. dollar fell to 0.9170 Swiss franc from 0.9195 franc, and fell to 97.67 Canadian cents from 98.12 Canadian cents.