Investing.com - The dollar extended gains against the euro on Monday as political tensions in the euro zone curbed investor demand for the single currency and was steady at two-and-a-half year highs against the yen. During European late morning trade, the greenback hit session highs against the euro, with EUR/USD down 0.57% to 1.3562. Spanish 10-year bond yields edged higher on Monday as Prime Minister Mariano Rajoy faced calls to resign, following corruption allegations against him and senior officials in the ruling Popular Party. Italian borrowing costs were also higher amid uncertainty over the outcome of upcoming elections. Sentiment on the single currency was also hit after French Finance Minister Pierre Moscovici warned that the euro was too strong following its recent rally. The euro hit 14-month highs against the dollar on Friday after data showed that manufacturing activity in the euro zone improved in January, while inflation and unemployment stabilized, underlining the view that the crisis in the region has turned a corner. The dollar was little changed close to two-and-year highs against the yen, with USD/JPY edging up 0.05% to 92.81. The yen remained broadly weaker amid expectations that Japanese Prime Minister Shinzo Abe would keep pressure on the Bank of Japan to step up easing measures. The dollar rallied against the yen on Friday after official data showed that U.S. employment grew modestly last month but job creation in the previous two months was larger than initially reported. The greenback was slightly lower against the pound, with GBP/USD rising 0.19% to 1.5727, but pushed higher against the Swiss franc, with USD/CHF up 0.38% to 0.9109. In the U.K., a report showed that the construction purchasing managers' index held steady at a 48.7 in January, unchanged from December’s reading, disappointing expectations for an improvement to 49.1. The greenback slid lower against its Canadian, Australian and New Zealand counterparts, with USD/CAD slipping 0.11% to 0.9953, AUD/USD rising 0.23% to 1.0431 and NZD/USD easing up 0.14% to 0.8464. Earlier Monday, official data showed that building approvals in Australia dropped 4.4% in December, disappointing expectations for a 1% rise. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.32% to 79.47. The U.S. was to release official data on factory orders later in the trading day.

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