The U.S. dollar jumped to a three-week high versus the Japanese yen and gained ground against other major currencies, boosted by a revival in risk appetite, analysts said.
"The rise in oil prices above $45 and the drop in volatility are two of the most noteworthy developments as asset markets resume trading today," wrote strategists at Lloyds TSB. "Despite the unrest in the Middle East, equities have managed to hold up relatively well."
Asian equities rallied early Monday and European markets were mostly higher. Reports that President-elect Barack Obama and congressional Democrats will push for a $775 billion stimulus package that includes as much as $300 billion in tax cuts helped lift stocks, analysts said. See Europe Markets.
"Renewed risk appetite should penalize both the Japanese yen and the Swiss franc," which have served as safe havens, wrote strategists at UniCredit MIB in Milan.
The dollar was up 1.4% versus the Japanese currency to 93.06, its highest level since Dec. 8.
The euro was down 1.6% against the greenback to $1.3692.
The British pound was little changed on the day, changing hands at $1.4562 versus the dollar. The euro, meanwhile, slipped 2% against sterling to 93.88 pence.
The dollar index a measure of the dollar against a trade-weighted index of rival currencies, was little changed on the day at 82.57.
Not all strategists were eager to pin the dollar's gains on revived risk appetite.
Daragh Maher, a strategist at Calyon Bank, said the euro and other currencies appeared to overextend gains versus the dollar ahead of the Christmas holidays.
After failing to establish new highs in post-holiday action, traders were eager to "jump on the bandwagon" and propel the dollar higher in the short term.
Maher said he would be inclined to buy the dollar on dips, but would be reluctant to chase the currency aggressively.
With U.S. nonfarm payrolls data due at the end of the week and minutes from the Fed's December meeting likely to reinforce expectations of quantitative easing, the upside for the greenback is likely to be limited, he said.
