By Bradley Davis Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The euro rose to a one-week high above $1.30 Monday as relief over the results of the stress tests of European banks offered the common currency support.
Concerns that the tests might not have been stringent enough appeared to subside, while positive economic data from the U.S. and Europe supported riskier assets. The safe-haven dollar dipped to its lowest level since early May against a basket of its competitors as
U.S. stocks rallied and demand increased for higher-yielding currencies.
Investors who had been nervous over the euro zone\'s sovereign debt crisis dipped back into euro as well as commodity-based currencies such as the Australian and New Zealand dollars after the stress tests indicated the region\'s banking system had not been hobbled by the crisis.
\"It seems now that the results of the European bank stress test are known...traders can check that item off the list of euro concerns,\" said Dan Cook, senior market analyst at IG Markets in Chicago.
Late Monday, the euro was at $1.2997, from $1.2918 late Friday. The dollar was at Y86.89 from Y87.45 late Friday, while the euro was at Y112.91 from Y112.98. The U.K. pound was at $1.5485 from $1.5432. The dollar was at CHF1.0485 from CHF1.0527.
The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 82.022, from 82.475. The index traded at its lowest level since May before rebounding slightly.
The greenback was down against most of its competitors despite data showing U.S. new home sales for June beat expectations, rising 23.6%, versus the 3.7% gain that economists had predicted. The better-than-expected rise follows a big downward revision to the previous month\'s already record low, but still represents the second-lowest pace of new home sales since records began in 1963, said RBC Economics Research.
But the June new homes sales data didn\'t allay concerns over how the U.S. will perform in the second half of this year, said Ron Leven, currency strategist at Morgan Stanley in New York.
\"We need more data. There is a growing uncertainty about the U.S. economy. There is a growing uncertainty about whether Europe is recovering,\" he said.
Investors are relieved to find that the results of the tests, released Friday, included no new calamities. The euro didn\'t soar on the outcome of the tests, but it didn\'t plummet either.
\"It\'s perhaps a little surprising that the euro has not moved dramatically in either direction after the results of the stress tests,\" said Nick Bennenbroek, head of currency strategy at Wells Fargo in New York. \"We had a tremendous amount of anticipation in the run-up
to the tests, so maybe it just reflects fatigue.\"
Separately, the global currency-trading business expanded at a double-digit rate in the six months to April this year, data from key monetary authorities around the world showed Monday.
The strong growth puts the foreign-exchange market on track to top a record $4 trillion in daily trading volume, according to an HSBC analysis, as the recovery continues after the credit crunch caused activity to dry up in the first part of 2009.
Currency trading flows in the U.K., the world\'s biggest dealing hub, grew by 15% in six months to April, taking the daily average to $1.747 trillion, data released by the Bank of England showed Monday. Within that total, trading in the spot market surged by 25% to $642 billion a day.
In the U.S., daily currency flows grew by a slightly more modest 11.8% to $754 billion in the six months to April, but that total was just shy of the record $762 billion seen in October 2008. The total includes spot transactions as well as currency derivatives.
With the ICE Dollar Index weakening, Deutsche Bank\'s PowerShares U.S. Dollar Index Bearish exchange-traded fund was up 0.50% from late Friday, while its PowerShares U.S. Dollar Index Bullish was down 0.54%. The two exchange-traded funds are based on Deutsche Bank\'s currency futures indexes, whose composition mirrors that of the ICE\'s Dollar Index.