The U.S. dollar is broadly higher to start the last full week of the month. The pre-weekend short-covering of the euro has been reversed and with Monday's more than 1.5% loss has retraced more than 50% of its gains scored in the second half of last week. News that Spain rescued a savings bank over the weekend contributed to the undermining of sentiment.

Sterling traded up to almost $1.4530 before being set back in the European morning; support was found ahead of $1.4400. Although the reports of 6.24 billion pounds in spending cuts announced by the new U.K. government have attracted interest, the June 22 emergency budget is seen as more significant.

Meanwhile, the dollar is trying to re-establish a foothold above the 90 yen level, but risk aversion may help cap the greenback in the 90.50-90.75 yen area. Hig- yielding emerging market currencies are generally firmer Monday.

Global equities were mixed Monday. The MSCI Asia-Pacific Index rose 0.5%, the first gain in more than a week. China's markets were up the most, perhaps encouraged by waning fears of additional tightening measures during the European crisis. In the last two sessions, the Shanghai Composite is up 7.8%.

European bourses have strugged to maintain early gains, with Germany, Spain and Italy turning lower by midday. Note that many bourses in Europe are closed Monday for holidays.

Japanese government bonds snapped a three-day advance Monday. The benchmark 10-year yield remains within a couple of basis points of its lowest levels since last December. In contrast, European bonds and U.S. Treasuries are firmer, with yields around two basis points lower. The U.S. Treasury will sell $113 billion of coupons this week, which is about $5 billion less than raised by a similar coupon sale last month.

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