Dollar slips vs euro as U.S. bank earnings loom

By Nick Olivari

NEW YORK (Reuters) - The dollar and yen dropped against the euro on Monday as improved appetite for risk eroded the safe-haven appeal of the U.S. and Japanese currencies.

Risk sentiment has improved in recent sessions, buoyed by a five-week rally in Wall Street stocks and growing hopes that the financial sector and global economy may be past the worst.

Higher-yielding currencies including the Australian and New Zealand dollars advanced, with investor optimism further boosted by a report that China was considering more stimulus steps to promote growth.

Light volume exacerbated price moves, with many financial centers closed for the Easter holiday and markets waiting for the U.S. corporate earnings season to get into full swing.

"The major theme today is China and the positive outlook for a recovery with the Australian and New Zealand dollars benefiting from the theme," said Andrew Busch, global FX strategist at BMO Capital Markets in Chicago in a note to clients. "The greenback and Japanese yen are losing value against most major currencies with market appetite for risk increasing with the recent string of positive equity moves."

In mid-afternoon trade in New York, the euro rose 1.4 percent to $1.3369 and traded up 1.3 percent at 133.83 yen.

The dollar was down 0.1 percent versus the yen at 100.11 yen. Last week, the U.S. currency touched 101.45 yen, its highest level in six months, as stock gains worldwide encouraged investors to move away from the perceived safety of the yen.

Commodity currencies rallied, fueled by the prospect of a recovery in the Chinese economy. China is planning a new economic stimulus package targeted at boosting consumption, the China Securities Journal reported, citing an official of the State Information Center.