Forex

The dollar recently extended its earlier gains versus key rivals as U.S. stocks rise and after Federal Reserve Bank of Philadelphia President Charles Plosser warned that inflationary pressures are "too high."

Lower crude oil prices Tuesday have helped equities recover from disappointing earnings reports, and higher stock indexes have been boosting the dollar lately. The Dow Jones Industrial Average was recently up about 50 points after opening lower.

Earlier, the dollar was encouraged by a hawkish Plosser, who said prices are likely to drive the Fed to increase its fed funds rate sooner rather than later. A hike would increase the currency's yield and help it compete for investors against the higher-yielding euro.

A speech Tuesday morning by Treasury Secretary Henry Paulson also boosted dollar sentiment, after the currency slunk lower overnight on continued banking sector worries.

Paulson said a strong dollar is important to U.S. interests and that his "highest priority" is to stabilize the financial markets.

The euro fell to an intraday low of $1.5796 recently and the dollar rose to Y107.08. The U.K. pound also fell to an intraday low of $1.9929 and the dollar rose to an intraday high of CHF1.0283.

Since the euro made a new record high of $1.6040 last week, it has not traded below $1.5782.

"(A) break of this would inflict more serious technical damage on the euro," said Marc Chandler of Brown Brothers Harriman in New York.

Tuesday morning in New York, the euro was at $1.5799 from $1.5898 late Monday. The dollar was at Y107.06 from Y106.72, while the euro was at Y169.18 from Y169.67, according to EBS. The U.K. pound was at $1.9938 from $1.9990, and the dollar was at CHF1.0281 from CHF1.0202 late Monday.

Technically, the euro has been struggling to stay above $1.59 lately, said Steven Englander, currency strategist at Lehman Brothers in New York. When it didn't make much headway overnight, and earnings numbers outside the financial sector proved not quite as dire as the foreign exchange market had expected, the dollar advanced, he said.

The euro's been struggling "because the market's long, you're having trouble finding buyers," Englander said.

In addition, looking at the latest International Monetary Fund numbers, "central banks just haven't been big euro buyers recently," he said.

Before, central banks are what lent the euro a large part of its support.

"It's a valuation issue. They may not want the dollars they have, but it's a lot to buy the euro now," Englander said.