Dollar falls against euro after stress tests

AP News
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Posted: Jul 15, 2011 3:25 PM
Dollar falls against euro after stress tests

The dollar was little changed Friday after fewer European banks failed a stress test than market watchers had expected.

The European Banking Authority said eight banks failed the stress test. The stress tests measure whether a bank is strong enough to weather another recession, in the hopes that weak banks will strengthen their finances. Besides the eight that failed, Europe's banking regulator said another 16 banks barely passed.

Kathy Lien, director of global research and analysis at GFT, said in a research note that the euro would have suffered if more than 15 banks had failed.

Instead, the euro was barely changed after the results at $1.4136, up from $1.4135 late Thursday.

In the U.S. the Labor Department said Friday that consumer prices fell in June for the first time in a year, driven down by a drop in oil prices. A separate report from the Federal Reserve said that U.S. factories produced fewer goods in June than the previous month, a sign that the economic recovery isn't gaining strength.

"Manufacturing was once the sector that carried the U.S. recovery and now we are seeing widespread signs of weakness," said Lien.

In other trading Friday the British pound was nearly unchanged at $1.6123 from $1.6127 late Thursday.

The dollar remained at 79.11 Japanese yen, unchanged from Thursday, but fell to 0.8141 Swiss franc from 0.8173 franc. The U.S. dollar also dropped to 95.57 Canadian cents from 96.04 Canadian cents.