The euro gained ground against both the dollar and yen after an early morning release of Germany's

CPI data showed a contraction in inflation numbers.

Germany, Europe's largest economy, announced CPI figures that rose 3.1% year-over-year in June, a number slightly lower than was expected, and lesser than May's substantial rise. Inflation rose 3.5% in May to eight-year highs, causing sincere inflation worries and causing the euro to fall.

The euro rallied to one-week highs after the report this morning, trading recently for $0.8602, a small step up from Friday's close of $0.8571.

The

European Central Bank's

mandate is to maintain price levels -- and keep inflation restrained -- rather than focus on economic growth. But amid the global slowdown, this morning's news that eurozone inflation may be on the decline gave renewed hope to the possibility of further growth-inducing ECB interest-rate cuts in the future. The ECB has lowered interest rates only once this year, by 25 basis points, while the U.S.

Fed has cut five times, for a total of 250 basis points.

The

Federal Open Market Committee

meets again on Wednesday, and is expected to cut interest rates by 50 basis points once again.

A Swedish crown-supportive intervention by the

Riksbank

-- the Swedish central bank -- into the currency markets this morning gave a brief rise to the euro as well. The hopes that dollars were sold while a European currency was bought in bulk gave the euro room to rise preliminarily against the dollar, until it was made clear that the Swedish government had bought crowns in exchange for euros, and not dollars. The Riksbank

intervened recently in support of the crown, selling dollars rather than selling euros, as it did this time.

The Riksbank justified this morning's intervention by claiming that a depreciating crown poses a threat of inflation. The crown traded for 10.6175 crowns per dollar recently, and for 9.1395 crowns per euro.

A strong win overnight in local Tokyo elections by the

Liberal Democratic Party

were seen as increasing the potential for real structural reforms by Prime Minister

Junichiro Koizumi's

government. The yen strengthened on the news. The dollar, weakened against the yen, slipped to 123.94 yen per dollar, from 124.48 yen per dollar at last Friday's close. The euro also weakened in trade against the yen, trading for 106.59 yen per euro recently, slightly below last week's close of 106.71 yen per euro.

The British pound climbed slightly on the dollar, trading for $1.4142 recently, up from $1.428 at last close.

The U.S. dollar rounded out today's losing streak by slipping in value to the other members of the dollar bloc. The Australian dollar rose to $0.5176 most recently, just a little off from last week's close of $0.5156. The U.S. currency slid just a little in trade against the Canadian dollar, trading for C$1.5202 recently. The U.S. dollar ended Friday's trading session at C$1.5222.

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