U.S. dollar falls vs euro after China stimulus plan

By Wanfeng Zhou

NEW YORK (Reuters) - The U.S. dollar fell against the euro on Monday as news of a large economic stimulus package from China made traders more willing to take on risk.

Initial optimism quickly faded, however, as U.S. stocks surrendered early gains on concerns that China's plan may not be enough to help avert a global recession, helping the safe-haven yen regain some strength versus the greenback.

China launched an economic stimulus package on Sunday worth nearly $600 billion in what could mark the start of a round of big spending or interest rate cuts to stave off a recession in many countries.

"There has been some renewed hope that since China is a key driver of global growth, that might lead to some recovery in market sentiment," said Samarjit Shankar, director for global strategy at The Bank of New York Mellon in Boston.

"(But) it remains to be seen how much is followed through, which sectors get the additional spending and most importantly, whether that translates into improved quarterly growth," he added. "The jury is still out."

In midday New York trading, the euro rose 0.3 percent against the dollar to $1.2772. It had jumped to an intraday high at $1.2927 as some analysts said the currency could be the main beneficiary of China's stimulus package.

Against the yen, the dollar gave up early gains and last traded down 0.3 percent at 97.94 yen, while the euro was down at 125.13 yen.

The ICE Futures U.S. dollar index .DXY, which tracks the greenback against a basket of six currencies, last traded down 0.1 percent at 85.822.