WORLD FOREX

Euro Sinks Lower As Stocks Retreat

NEW YORK (Dow Jones)--The dollar has extended its recovery against the euro and a broad range of other currencies in midmorning trading Monday after U.S. stock markets show substantial weakness.

The euro dropped below the $1.3400 mark, registering a session low at $1.3397 before rebounding modestly, according to electronic trading system EBS.

The British pound and the Canadian dollar also receded against the greenback.

The Dow Jones Industrial Average was down about 100 points in midmorning activity Monday.

Equity market fluctuations will be the key driver of the dollar Monday and likely through the balance of the week in the absence of many significant data releases or other potentially market-moving events, said Adam Cole, chief currency strategist at RBC Capital Markets in London.

"I think we'll pretty slavishly follow the stock market short term," Cole said.

The yen recovered against the dollar, trimming the greenback's gains as the earlier risk-friendly mood in markets grew into something warier.

In midmorning trading Monday, the euro was at $1.3418 from $1.3486. The dollar was at Y100.83 from Y100.32 late Friday in New York and from a session high at Y101.45, according to EBS.

The euro was at Y135.27 from Y135.25

The dollar was also at CHF1.1362 from CHF1.1315, while the pound was at $1.4799 a daily high at $1.4957 and from $1.4822 late Friday.

News that North Korea had launched a long-range missile that could be part of a nuclear development program failed to have much impact on sentiment, despite concerns in Japan.

Analysts noted that the yen had been under pressure anyway because of the rise in risk appetite, which made the resumption of carry trades more likely.

But the forthcoming Easter holidays could well ensure that any further yen losses are limited, with some analysts reckoning that the dollar will only make it as far as Y102 before profit-taking sets in.

RBC's Cole said the approach of Easter-related holidays later in the week in many jurisdictions and the fact the major event risk posed by the U.S. nonfarm payrolls data last Friday has passed could keep trading flows in currency markets somewhat limited in the next few sessions.

The Australian and Canadian dollar are among the few currencies with significant challenges in the coming sessions, as they both face March payroll jobs reports later in the week, and the Reserve Bank of Australia has a policy meeting on Tuesday, Cole said.