The dollar may retain a steadier tone, but will struggle to make much headway unless there is evidence that house prices are stabilising.

The dollar peaked just stronger than 1.5350 against the Euro as liquidity remained at reduced levels before weakening again on Tuesday.

US existing home sales recovered to an annual rate of 5.03mn in February from 4.86mn previously and inventories also fell which will increase optimism that a bottom in the market may have been found. There will, however, be further unease over price trends as there was an 8.2% annual drop in median prices over the year. While prices continue to decline, mortgage difficulties will certainly persist and could easily intensify. In this context, the latest US house-price and consumer confidence data will be watched closely on Tuesday.

A higher JP Morgan offer price for its Bear Stearns purchase also improved overall risk appetite. There will be some further speculation over potential G7 action to stabilise currencies through joint intervention. The US currency still weakened back towards 1.5590 in Europe on Tuesday as overall confidence in the economy remained frail while commodity prices recovered