By William L. Watts, MarketWatch LONDON (MarketWatch) -- The U.S. dollar remained higher versus most major rivals other than the Japanese yen Monday, but trimmed earlier gains as the European single currency found modest support on apparent short covering after hitting a four-year low versus the greenback in Asian trade. The single currency (CUR_EURUSD 1.2332, -0.0020, -0.1619%) changed hands at $1.2316 versus the U.S. dollar in recent action, down from $1.2375 in North American activity late Friday but a modest recovery from a low of $1.2233 earlier in the day, which marked its lowest level since April 2006. The euro was 0.4% lower versus the Japanese currency (CUR_EURYEN 116.0000, -1.7100, -1.4527%) at 113.82 yen. Earlier, the single currency fell as low as 112.44 yen, its lowest level since February. The euro's plunge, which has seen it decline by around 15% versus the dollar since trading above $1.50 in early December, has done heavy damage to technical charts. "If the euro closes below 1.2500 (on the monthly chart), and the neckline resistance at $1.2720, then given the current lack of confidence and problems in the euro zone, there is potential for a move below parity and possibly lower within the next two to three years, if the currency breaks the $1.2135 50% retracement level," said Michael Hewson, market analyst at CMC Markets. The European unit last traded at parity to the U.S. dollar in 2002. The euro is also closing in on key support versus the Japanese currency around the 111 yen area, Hewson said. A break and close below that level could spark a move toward 100 yen. Meanwhile, fears the euro-zone's debt problems could turn into a full-blown funding crisis for European banks that could, in turn, threaten to reignite the global financial crisis have sparked flight-to-quality flows into the U.S. and Japanese currencies. "A failing European bank could push the world economy into a second dip," wrote strategists at BNP Paribas. "This risk is not small and suggests selling high-yielding commodity currencies such as the Australian dollar where bullish positioning has been extreme." The Aussie (CUR_AUDUSD 0.8785, -0.0062, -0.7008%) changed hands in recent action at 87.79 U.S. cents, down 0.9% on the day, after slipping as low as 87.20 cents, according to FactSet. The Australian currency fell 0.7% versus the Japanese unit to trade at 81.28 yen, rebounding from 80.08 yen in earlier action. The dollar index (DXY 86.51, +0.41, +0.48%) , which tracks the greenback against a trade-weighted basket of six other major currencies, rose to 86.575 from 86.158 late Friday. The dollar (CUR_USDYEN 92.3700, +0.0800, +0.0867%) erased an earlier decline to trade at ¥92.48, up from ¥92.21 late Friday. The British pound (CUR_GBPUSD 1.4409, -0.0116, -0.7986%) was also pressured against the dollar, falling to $1.4410, down 0.8%. Read commentary on Britain's role in the euro's plight. "On the present trajectory, the euro will lurch toward parity with the U.S. dollar and through it before year-end, then disintegrate," Uwe Parpart, chief Asia strategist at Cantor Fitzgerald, said in emailed comments Monday. British Chancellor of the Exchequer George Osborne on Monday said he would present an "emergency" budget on June 22 and will next week lay out details of 6 billion pounds ($8.9 billion) worth of spending cuts set to take effect in the current financial year. Read about the U.K. budget plans.

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