By William L. Watts, MarketWatch LONDON (MarketWatch) -- The dollar was up slightly versus the euro Monday, while gaining on the British pound after purchasing managers indicated a slowdown in U.K. service-sector activity last month. Overall trade was subdued with U.S. financial markets closed for a national holiday. The euro (CUR_EURUSD 1.2522, -0.0034, -0.2708%) slipped to $1.2525, from $1.2553, and the British pound (CUR_GBPUSD 1.5126, -0.0070, -0.4606%) fell to $1.5124 from $1.5193 late Friday. The dollar ended last week on the ropes, with growth fears trumping a previous tendency for the U.S. unit to outperform most major rivals during periods of risk aversion. But strategists at UniCredit Bank in Milan warned that worries about a new global growth crisis and ongoing concerns about potential problems within European economic and monetary union will continue to fuel a rise in risk aversion. But the Japanese yen (CUR_USDYEN 87.6900, -0.0100, -0.0114%) and the Swiss franc (CUR_USDSWF 1.0647, +0.0007, +0.0658%) are likely to be the main winners from that shift. Meanwhile, the British pound was undercut after the purchasing managers index for the U.K. services sector fell more than expected amid worries that sharp government budget cuts and a rise in the value-added tax will hurt demand. Read about U.K. services PMI. On Monday, Bank of America-Merrill Lynch analysts cut their U.S. dollar/yen forecast, and now expect the U.S. unit to buy ¥89 at the end of the third quarter of this year, down from their previous forecast of ¥94. They also expect the dollar to trade at ¥90 at the end of the fourth quarter, down from ¥97, and at ¥91 at the end of the first quarter of 2011, down from ¥100. "As subdued U.S. rate-hike expectations will limit the upside for U.S. market yields, USD-JPY [U.S. dollar-Japanese yen], which is highly sensitive to U.S.-Japan yield differentials, is not likely to enter a steady upward trend in the next few quarters," they said. Against the yen, the dollar (CUR_USDYEN 87.6900, -0.0100, -0.0114%) bought ¥87.71, down slightly from ¥87.81 in late North American trading on Friday. The euro fell 0.3% versus the Swiss franc (CUR_EURCHF 1.3335, -0.0025, -0.1871%) to trade at 1.3314 francs. The Swiss unit was little changed versus the dollar at CHF1.0625. The dollar index (DXY 84.60, +0.18, +0.21%) , a measure of the greenback against a basket of six major currencies, changed hands at 84.583, compared with 84.410 late Friday.

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