By AP Business Writer
updated 5/10/2010 11:15:33 AM ET 2010-05-10T15:15:33

The euro gave back most of its big gain Monday as markets weighed the costs of a massive rescue package designed to save Europe's shared currency.

After rising to almost $1.31 overnight, the euro drifted back to $1.2804 in late New York trading, dropping as low as $1.2764. Late Friday, the euro was worth $1.2731.

The European Union, countries using the euro and the International Monetary Fund have agreed to offer €750 billion, or nearly $1 trillion, in loans for heavily-indebted countries using the euro. The European Central Bank agreed to buy government and private debt in order to keep borrowing costs low.

Fears that soaring borrowing costs could lead to defaults had spread from Greece to other European countries such as Portugal and Spain, driving the euro to a 14-month low of $1.2523 last week.

"Significant measures have been taken to stabilize the market," said Marc Chandler of Brown Brothers Harriman in New York. "On the other hand, the significant measures have a heavy price."

The ECB's balance sheet will suffer from buying low-quality bonds from Greece, he said.

European governments will need to rein in their spending in order to meet the rules for receiving aid, weighing on their economic growth, said UBS analyst Manuel Oliveri. The dollar stands to benefit in the long run as the U.S. economy grows more quickly than the combined economy of the 16 countries using the euro, he added.

In other trading, the dollar fell against actively traded currencies, particularly those of big commodity exporters.

Traders have been cutting their exposure to risk for weeks out of fear of a growing European debt crisis, but on Monday they bid up riskier assets such as oil and other commodities used in manufacturing, as well as stocks and emerging-market currencies. That helped push the dollar and Treasurys lower.

The British pound rose to $1.4881 from $1.4808 late Friday, while the dollar dipped to 1.1085 Swiss francs from 1.1090 francs and fell to 1.0250 Canadian dollars from 1.0433 Canadian dollars. The dollar was lower versus the Australian and New Zealand dollars, fell sharply against the Brazilian real and Mexican peso, and slid against most Asian currencies.

The dollar rose to 93.10 Japanese yen from 91.35 yen. Traders treat the yen as a safe purchase when markets are volatile.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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