In the currency market, the dollar edged lower against the euro. Late Monday, the euro was trading at $1.275 vs. $1.2712 on Friday. China’s state-run news agency, Xinhua, said that the government’s stimulus program will “will loosen credit conditions, cut taxes and embark on a massive infrastructure spending program in a wide-ranging effort to offset adverse global economic conditions by boosting domestic demand.”

The only question was how quickly the money would hit the streets, and Jing Ulrich, J.P. Morgan Chase, said that, “With a healthy fiscal surplus and low government debt, China appears to have considerable resources to ramp up its fiscal spending in a short period of time.”

Weekend news of the Chinese package had lifted equity markets around the world and revived risk appetite, but only momentarily in the U.S. as domestic stock markets ended the day down and the buck—which has been a primary destination for the risk-averse for some time now—gathered some late steam.

China’s plan “could well form the starting point of a coordinated fiscal-stimulus plan as world leaders [the G20] gather in Washington later this week,” wrote strategists at Lloyds TSB.

And it could prove to be a defining moment in the global crisis, thinks Neil Mellor, currency strategist at Bank of New York Mellon. But Mellor wrote that “even if this optimistic scenario ultimately proves to be correct, the inevitable and continued deterioration in global economic data may prove to be a rather overwhelming test of the market’s mettle in the meantime.”

Source: Dollar cuts early losses -  China’s stimulus package the talk of the trade