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Euro drops again against dollar following stimulus

The dollar advanced against the euro as investors weighed last week's aggressive European monetary stimulus policy and anticipated key US economic data later in the week.

NEW YORK: The dollar advanced against the euro on Tuesday as investors weighed last week's aggressive European monetary stimulus policy and anticipated key US economic data later in the week.

"After an initial limited reaction, last week's easing by the European Central Bank appears to be weighing on the euro, with today's decline coming despite favourable Eurozone data," said Nick Bennenbroek, head of currency strategy at Wells Fargo Securities, who said the euros decline came despite solid data on French and Italian industrial output.

The euro dipped to $1.3545 from $1.3592.

Kathy Lien, managing director at BK Asset Management, said the euro's retreat followed the ECB's move last week to slash interest rates. But she cautioned against expecting more profound declines next to the greenback.

Lien predicted "low volatility" would cap the decline in the euro versus the dollar. She does not expect the euro to fall to $1.30.

"We don't expect the (ECB) to seriously consider more stimulus until the economy has at least 1 to 2 months to absorb their latest changes," Lien said.

Lien said the most significant US datapoint this week will be May retail sales, which will be released Thursday.

But the report will only significantly affect the US Federal Reserve's calculus on interest rates if spending rises or fall by more than two percent.

More likely, the report's "impact on Fed policy and in turn the greenback will be nominal," Lien said.

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