By Barbara Kollmeyer and Laura He, MarketWatch MADRID (MarketWatch) -- The U.S. dollar extended losses against the euro on Monday, after Germany's Ifo business climate index rose by more than expected, while the Japanese yen gained as Asia stock markets came under pressure. The euro (EURUSD) rose to $1.3760 from $1.3737 late Friday. The German Ifo business -climate index rose to 111.3 in February, from 110.6 in the prior month. That was more than economists had expected and marked the fourth-straight monthly improvement. The euro drew some support from the fact that Moody's Investors Service lifted Spain's government-bond rating by one notch to Baa2 and assigned a "positive" outlook to the rating. In December, Spain's government bond rating was at Baa3, the lowest investment-grate rating. In its move on Friday, Moody's said Spain's economy is rebalancing towards a "more sustainable growth model, which is being underpinned by structural improvements in the country's external competitiveness, and the ongoing deleveraging in the domestic economy." Investors were also taking in comments from European Central Bank (ECB) President Mario Draghi on Sunday, when he said the central bank's March policy meeting could be crucial in determining whether the ECB will provide more economic stimulus to the euro zone. The comments sparked some speculation that the central bank could cut rates next month. In other trading, the U.S. dollar (USDJPY) dropped against the yen to Yen102.40 from Yen102.62 late Friday, as investors bought the traditionally safe-haven Japanese currency after Asian stocks suffered sharp falls. The Shanghai Composite Index fell 1.7% amid reports of tightening of loans by Chinese banks. Data out Monday showed stubbornly high property prices and fears of a fresh round of market curbs from Beijing weighed on property stocks. The Chinese yuan (USDCNY) has experienced sharp declines against the U.S. dollar since last week, amid speculation as to whether China will make a major shift in policy following recent weak economic data and increasing inflows of capital. The People's Bank of China (PBoC) on Monday fixed the daily midpoint for yuan trading at 6.1189 per dollar, guiding the local currency lower for a fifth consecutive session. "We do not expect much CNY (Chinese yuan) depreciation, but the shift away from the previous steady pace of appreciation could unwind 'hot money' inflows," said Tao Wang, an economist for UBS based in Hong Kong. Analysts from Royal Bank of Scotland (RBS) also said the recent weakening of the yuan may signal a change in China's exchange-rate policy, with increased two-way volatility. "Although the CNY is basically still driven by policy makers rather than market forces, the PBoC is keen to move to more exchange rate flexibility and volatility," RBS said in a note on Monday. "This fits in with the reform strategy on monetary and financial policy, and senior PBoC officials increasingly frown upon the merits of further FX (foreign exchange) reserve accumulation. " The bank projected the exchange rate between the dollar and the yuan to end 2014 at around 5.88 Chinese yuan. Elsewhere, the British pound (GBPUSD) rose versus the dollar, up to $1.6671 from $1.6629 late Friday, and the Australian dollar (AUDUSD) also gained ground, up to 89.79 U.S. cents from 89.68 U.S. cents. The ICE dollar index (DXY), which tracks the greenback against six rival currencies, dropped to 80.137 from 80.269 late Friday. The WSJ Dollar index , an alternate measure of the U.S. unit's strength against a broader basket of comparison currencies, edged down to 73.59 from 73.68 late Friday.

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