Dollar Stable Amid More Positive Economic News

The dollar recovered early losses against the yen and was steady versus European rivals on Monday amid another encouraging reading on the U.S. economy.

Activity in the U.S. service sector expanded at a faster than expected in rate in the month of April, according to a report released by the Institute for Supply Management on Monday.

The report is further evidence that the winter lull in the U.S. economic recovery was likely temporary and due to brutally cold weather.

The ISM said its non-manufacturing index rose to 55.2 in April from 53.1 in March, with a reading above 50 indicating growth in the service sector. Economists had been expecting the index to show a more modest increase to a reading of 54.2.

The dollar touched a 2-week low of 101.90 versus the yen, but was back above Y102.10 by mid-day.

There was little movement in the dollar/euro despite a closely watched report on Euro zone inflation.

The dollar held at $1.3877 against the euro, and was stuck at $1.6870 versus the sterling. Neither pair has seen much movement in May.

Eurozone producer prices continued to decline in March, albeit at a slightly slower pace, adding to concerns of deflation taking hold in the currency bloc figures from Eurostat showed Monday.

Industrial producer prices dropped 1.6 percent year-on-year, after a 1.7 percent fall in February, which was the biggest decrease since December 2009. Economists had forecast the pace of decline to remain unchanged.

However, any risk of deflation remains very low, the European Commission said Monday, while its latest projections showed that inflation will take more time than estimated earlier to return to the European Central Bank's target.

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