Dollar, yen tally fresh gains at expense of single currency
The euro lost ground Monday, with traders eyeing a meeting of the European Central Bank later this week amid signs of significant deterioration in the 16-nation region's manufacturing sector.
The dollar started the week higher, its momentum carrying over after ending Friday on a strong note.
The dollar index , which measures the greenback against a basket of six major counterparts, stood at 83.062, up from 82.483 on Friday.
The greenback was buoyed Friday against most major currencies despite a government report showing a decline of more than 500,000 in U.S. nonfarm payrolls for December.
Traders had braced for the job losses coming in potentially much larger.
Meanwhile, a run of abysmal euro-zone data boosted odds for an interest-rate cut by the European Central Bank on Thursday, economists said,
In addition, the data raise questions about the ability of euro-zone officials to deal with a rapidly deteriorating economic outlook. Read about last week's euro-zone manufacturing data.
"While the ECB could cut by 50 basis points this week (our expectation), we would need to see significant flexibility on the part of the ECB to help stabilize the economy and sentiment on the euro," wrote strategists at BNP Paribas.
The European Central Bank's key lending rate stands at 2.5%. Most economists expect the central bank to order up a reduction of half a percentage point, or 50 basis points, on Thursday.
Flight-to-safety buying helped support the dollar and lifted the Japanese yen, which remains the ultimate safe-haven play, strategists said.
Questions, questions
Meanwhile, economists at KBC Bank in Brussels said the currency market has yet to find a trading theme for the new year.
"Should the dollar get the advantage of the doubt on the expectation that the U.S. economy will emerge from the crisis first, supported by hefty stimulus measures? Or will the dollar suffer from the flood of liquidity and extremely low interest rates as the Fed shifts toward quantitative easing," they asked.
The Federal Reserve has reduced benchmark U.S. interest rates to a range of 0.25% to zero percent, leaving the central bank in the position of resorting to other measures in efforts to revive the largest world economy.
The dollar fell to 90.01 yen from 90.42 yen at the end of last week, extending Friday's pullback.
For its part, the euro fell steeply against the dollar on Friday and saw further losses to start the week, changing hands at $1.3405, down from $1.3452 in North American activity late Friday.
The euro also slipped versus the Japanese currency, trading at 120.60 yen, down 0.8%.
However, the euro rebounded versus the British pound, fetching 89.51 pence, up 1% on the day.
