NEW YORK: The dollar fell on Monday against the yen and euro as profit-taking emerged after the US currency hit a seven-year high against the yen that was briefly rattled by Moody's decision to downgrade Japan's credit rating.
The greenback rose as high as 119.15 yen on the EBS trading platform, its highest since July 2007, immediately after the rating agency lowered the rating of the world's third biggest economy by a notch to A1 from AA3 due to its fiscal problems.
Traders however sought to reduce dollar exposure in advance of the European Central Bank's policy meeting on Thursday and November US payrolls data on Friday, analysts said. "It's a bit of profit-taking ahead of a big event week," said Greg Anderson, global head of FX strategy at BMO Capital Markets in New York.
Analysts said the dollar's longer-term surge against the yen and other currencies remained intact despite the weak start to December as the US Federal Reserve will likely consider raising interest rates in 2015 while other major central banks might embark on more stimulus to help their economies.
"Nothing that happened today has changed the story for the dollar," said Lou Brien, market strategist at DRW Trading in Chicago. The dollar rose 5.6 percent against the yen in November, bringing its year-to-date gain to 12.4 percent.
It was last down 0.3 percent at 118.29 yen, EBS data showed.
The euro rose 0.2 percent to $1.2476 after weakening 0.6 percent versus the greenback in November.
It has fallen 9.2 percent against the dollar so far in 2014.
The dollar reduced its earlier decline against the yen and euro on Monday after the Institute for Supply Management said its index on US manufacturing activity fell less than expected in November. The euro's bounce against the dollar is likely limited as lower commodity and oil prices stoked bets the ECB would ease policy further to combat deflationary risks by early 2015.
None of the 17 traders Reuters polled expected the ECB to introduce more stimulus at its Thursday meeting.
The euro rose to a three-week high of 1.2044 Swiss francs after the Swiss rejected in a referendum an initiative which would have forced their central bank to buy more gold.
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