Dollar strongly rises versus euro Tuesday after Navy SEALs killed Al-Qaeda chief Osama bin Laden in a “claimed” secret mission in Pakistan

The dollar recovered further against the euro on Tuesday as London investors reacted for the first time to the death of Osama bin Laden.

The European single currency fell to $1.4805 from $1.4824 late in New York on Monday, when it also jumped above $1.49 for the first time in 16 months.

Against the Japanese currency, the dollar dropped to 81.02 yen from 81.23 late Monday.

"The initial boost to risk appetite on the news of the demise of bin Laden quickly petered out as the market concluded that it would be naive to assume that the threat of terrorism had died alongside him," said Rabobank senior currency strategist Jane Foley.

The dollar had lost ground to the euro on Monday in the wake of the US killing of Bin Laden, while gold opened the new month with yet another record high.

With London trading closed for the May Day holiday, the dollar first gained in New York on the news that US operatives found and killed the Al-Qaeda chief in northeast Pakistan.

But the greenback then slid intraday to a 17-month low of $1.4902 to one euro, a bare nine cents shy of the July 2008 record.

Meanwhile gold powered to a new high of $1,577.57 an ounce, before swinging sharply back to the $1,555 level late Monday.

Investors in Europe were also looking ahead to interest rate decisions due Thursday from the European Central Bank and Bank of England.

The European Central Bank will keep its key interest rate at 1.25 percent this week, analysts say, but might signal a further increase amid climbing prices in the 17-nation euro zone.

Renewed fears of a Greek debt default will overshadow the meeting of ECB policymakers in Finland even though European Union (EU) leaders still reject speculation that financial markets now all but take for granted.

The Bank of England is widely expected to keep it key lending rate at a record-low level of 0.50 percent as Britain's weak economic recovery offsets high inflation.

Japanese financial markets are closed from Tuesday to Thursday for a three-day public holiday. Trading resumes on Friday.

In London on Tuesday, the euro changed hands at $1.4805 against $1.4824 late in New York on Monday, at 119.77 yen (120.42), £0.8969 (0.8906) and 1.2790 Swiss francs (1.2820).

The dollar stood at 81.02 yen (81.23) and 0.8651 Swiss francs (0.8647).

The pound was at $1.6499 (1.6643).

On the London Bullion Market, gold prices rose to $1,544.03 an ounce from $1,535.50 late Monday.