The U.S. dollar opened modestly softer against the euro but generally steady against the rest of its main counterparts following a quiet overnight session. Monday's global trading session was further thinned by a holiday in Japan for Marine Day.

The euro entered Monday's North American session below a recent two-month peak against the dollar after Ireland experienced a ratings downgrade. Moody's Investor Service cut Ireland's sovereign bond rating by one notch to Aa2 from Aa1. The ratings agency said Ireland's outlook was stable, which helped the single currency's more muted reaction to the news. Still, Ireland's ratings downgrade was a reminder to investors that the 16-nation community is not quite out of the woods yet as it battles back from the brink of bankruptcy in smaller economies like Greece, Portugal and Spain.

The U.K. currency opened steady against the dollar though near a seven-week low against the euro. The pound was little moved by hawkish talk from a Bank of England policymaker, Andrew Sentance, who again spoke in favor of gradual increases to British interest rates. Sentance was the same sole dissenter at last month's BOE meeting at which he preferred a quarter-point rate increase to the central bank's 0.5% key interest rate.

The Canadian dollar firmed against its U.S. rival, getting a boost from generally positive risk sentiment and firmer oil prices above $76 a barrel. All eyes tomorrow will be on the Bank of Canada who meets to consider monetary policy. Most market watchers expect the Canadian central bank to lift its interest rate by 25 basis points to 0.75%.

EUR: The euro stayed below Friday's two-month high against the dollar and even firmed at the outset of Monday trading, despite news of a ratings downgrade in Ireland. Moody's Investor Service cut Ireland's sovereign bond rating by one level to Aa2 from Aa1. The credit ratings agency cited a "significant loss of financial strength" as the nation continues to improve its fiscal position. The news was a reminder to investors about the continued financial struggles among the bloc's weaker economies that also includes Greece, Spain and Portugal.

Moody's kept its stable outlook for Ireland, which somewhat helped to lessen the impact on the single currency. The news also underscored the progress that seems to be under way in the euro zone as such news weeks ago was the type that weighed heavily on the single currency. The euro could adhere to its recent ranges ahead of Friday's release of key European bank stress tests. The tests should give market participants a good idea of the fiscal soundness of 91 European banks. Any negative surprises would likely pressure the single currency.

GBP: The British pound steadied against the greenback early Monday, now down about 1.25% from the 2-1/2-month high sterling had hit against the buck last Thursday. But against the euro, the pound hit a 7-week low Monday in a holiday-thinned overnight session. Sterling did recover some following more hawkish talk from BOE member Andrew Sentance, the same official who last month dissented in favor of a 25 basis point rate hike amid signs of elevated U.K. inflation.

Before market participants start to realistically price in a chance of a sooner-than-expected interest rate hike by the U.K. central bank, other policymakers will need to get behind Sentance's hawkish stance toward BOE policy. The key events out of the U.K. this week include the release of the BOE minutes from its June meeting on Wednesday and Friday's release of growth during the April to June quarter.

AUD: The Australian dollar kept near a 1-1/2-week low against the dollar on Monday as the unclear outlook for the world economy generally pressured the local dollar's recent movements. Worries about slower growth in the U.S. and China, Australia's largest trading partner, have weighed on currencies that are closely linked to global growth prospects.

USD: The National Association of Home Builders released its key index on home builder sentiment today at 10 a.m. ET. The housing market will vie for center stage this week with Federal Reserve Chairman Ben Bernanke, who testifies on Wednesday and Thursday on Capitol Hill. Market watchers tomorrow will study a report on U.S. housing starts, followed by existing home sales on Thursday. A stabilizing U.S. housing sector is seen as critical in order for the U.S. economy to sustain its recovery.

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