The US dollar extended its early morning rally against the European majors on Monday morning in New York. At the same time, the greenback held steady against the Japanese yen but ticked slightly down against the UK's sterling during the session.

As there were little economic reports to chew, investors reacted poorly to some negative news from the auto sector as the U.S. government stated that bankruptcy might be the best solution for troubled automakers in the country, including General Motors, whose CEO Rick Wagoner has been forced to quit the job.

The Obama administration will continue to provide operating funds for the next few weeks, but it has given both GM and Chrysler a final deadline, threatening bankruptcy if the beleaguered auto giants do not significantly increase their efforts to restructure their business.

The greenback rose to 1.3116 against the euro by 10:30 am ET, the highest mark since March 18. The euro-buck pair moved sideways thereafter and is currently quoted at 1.3163. The pair was worth 1.3295 at Friday's New York session close.

In economic news from the euro area, the euro zone economic sentiment declined further in March, but more slowly than in the first two months of 2009, a monthly survey carried out by European Commission showed today.

The economic sentiment index declined to 64.6 in March, while the consumer confidence and services confidence in March declined one point each to minus 34 and minus 25, respectively.

While industrial confidence slid 2 points to minus 38, confidence in construction remained at minus 32. The business climate indicator for the Euro area fell to minus 3.58.

Against the Swiss franc, the dollar climbed to a 12-day high of 1.1552 by 10:30 am ET. This may be compared to last week's North American session closing value of 1.1448. The pair is presently trading at 1.1528 with 1.172 seen as the next target level.

Rebounding from a weekly low of 95.97 hit early in the European session, the greenback advanced to 97.13 against the yen by 8:30 am ET Monday. The pair moved sideways thereafter and is currently quoted at 97.10. The greenback-yen pair was worth 97.88 at Friday's North American close.

The yen gained in early morning deals despite a disappointing economic report from Japan. Industrial output in Japan plummeted by 9.4% in February compared to the previous month, the Ministry of Economy, Trade and Industry said. That was slightly worse than forecasts that called for a decline of 9.0% following the 10.2% decline in January. On an annual basis, industrial output dropped 38.4% compared to forecasts of a 38.1% decline after the 31.0% retreat in the previous month.

As recession fears increased in Japan, analysts expect the Japanese government may map out its third fiscal stimulus package ahead of the G20 summit this week to prop up the economy. Japan has already announced two stimulus packages with combined spending of 12 trillion yen to ease the pain from the global credit crisis.

Against the UK's sterling, the US dollar edged lower to 1.4237 by 11:20 am ET from a 12-day high of 1.4114 hit around 5:20 am ET. The cable that closed Friday's New York trading at 1.4323 is currently trading near 1.417.

The pound tumbled in early morning deals after a report by the property industry group Hometrack showed that the average price for a home in England and Wales plummeted by a record 10.3 percent on year in March. March's annual fall was the biggest yet in Hometrack's monthly survey of estate agents and surveyors, which started in 2000 and has persistently reported lower price falls than official government data.

Another report showed that Britain's financial services industry is cutting jobs at the fastest rate for 16 years as it cuts costs to soften the blow of a steep fall in profitability. The CBI/PWC financial services survey, covering the three months to early March, found 9 percent of companies reporting a rise in business volumes and 56 percent saying volumes fell, giving a net 47 percent of companies reporting a fall. That marked a sixth successive quarter of declines.

In addition, UK M4 money supply increased 1.4% month-on-month in February, unrevised from the preliminary estimate, after rising 2.4% in January, a final report from the Bank of England showed. On an annual basis, money supply rose 18.7%, revised down from an initial estimate of 18.8% growth. M4 sterling lending increased GBP 21.4 billion, larger than GBP 6.7 billion increase recorded in January.

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