The dollar rallied verus the euro and sterling Tuesday morning in New York as risk averse traders expressed concerns about the start of earnings season, which kicks off today with quarterly results from Alcoa.

Traders considered results showing that sconomic contraction in the euro area in the fourth quarter was more than initially estimated.

Final data from the Eurostat showed that gross domestic product, or GDP, contracted 1.6% quarter-on-quarter in the final three months of 2008. The pace of decline was slightly up from the previously estimated fall of 1.5%. GDP fell 0.3% each in the third and second quarters.

Here in the US, the economic calendar is light again on Tuesday, The consumer credit report from the Federal Reserve is due out this afternoon. Borrowing costs are expected to have fallen by 1.5% in February.

Looking at currencies, the dollar rose to 1.3252 in early action Tuesday. The pair has been moving between 1.3000 and and 1.3800 for the past few weeks.

The dollar also gained a bit of ground against the sterling, rising to 1.4650. Overall, the pair has seen choppy trading over the past few months, with the dollar leveling off since hitting a 23-year hoigh of 1.3501 earlier in the year.

Tuesday, a quarterly Economic Survey from the British Chambers of Commerce confirmed that the UK recession is still very serious and expects it to continue for some time. The business lobby said there is a clear need for corrective action and urged the government to act forcefully to ease the recession.

The dollar eased slightly versus the yen, but remained above the 100 mark, which was cracked on Friday for the first time since last fall. The dollar was at 100.18 yen as of 8 am ET.

Tuesday, the Bank of Japan retained its key interest rate, but it decided to expand the range of eligible collateral in order to make funds easily available.

The Policy Board of the central bank unanimously voted to hold the uncollateralized overnight call rate at 0.1%. The decision came in line with economists' expectations. The previous change in interest rates was a 20 basis point cut implemented in December 2008.

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