NEW YORK: The dollar fell from multi-year highs on Monday as investors took profits from gains built on a view that last week's strong U.S. employment report helped cement expectations the Federal Reserve will raise U.S. interest rates this year.
After Friday's unexpectedly strong nonfarm jobs data for February, the dollar had extended its gains against the euro to a fresh 11-1/2-year high.
"We seem to be taking a breather here, consolidating gains made off the nice jobs report. It is going to take something else to get us back down below the $1.0760 range, but we're not too sure what that immediate catalyst will be, given the economic calendar is light this week," said John Doyle, director of markets at Washington, D.C.-based Tempus Inc.
The euro held at $1.08575, up 0.12 percent, according to the EBS trading platform. It earlier fell to $1.0822 in Asian trade, marking the euro's weakest point since September 2003. The $1.07620 level is the next significant area of support.
The gap between U.S. Treasury yields and the euro zone widened, making U.S. investments more attractive for investors hunting for higher-performing and safe returns. While not universally accepted, markets anticipate the Fed will raise rates sometime mid-year, given the robust U.S. data.
However, inflation remains subdued and the payrolls report showed little wage growth, a key factor in determining the move on rates. The risk is that a too-soon increase in rates could stifle economic growth.
The euro is expected to remain under pressure as the European Central Bank started its 1 trillion-euro bond-buying programme on Monday.
Petr Krpata, a currency strategist at ING, expects short-lived euro gains.
"The start of quantitative easing will be one of the key reasons why the euro will remain soft," Krpata said.
The euro was up 0.30 percent to 131.31 yen. The dollar's one positive spot comes against the Japanese currency, rising a modest 0.10 percent to 120.96 yen, just off Friday's three-month high of 121.29 yen.
Greece's financial reforms are also a market focus. Dutch Finance Minister Jeroen Dijsselbloem, president of the Eurogroup of finance ministers, said Athens must start discussions for completing its bailout program and implementing reforms.
"The talks about the program and the reforms that are needed should restart very, very quickly. We are losing too much time," he said.
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