The euro bounced back on Monday as some funds scooped it up after a steep drop last week but speculators' bloated long positions in the currency pointed to a risk of further falls even after policymakers denied a report that Greece may consider quitting the eurozone.
A rebound in various commodity prices after their rout last week also helped to pull up the euro from its three-week low hit last week and lifted commodity currencies. But traders were not sure if the worst was yet over for commodities, and said that the euro looks vulnerable after the European Central Bank last week quelled expectations of a rate hike next month.
"Given the fast pace of the euro's rise up until last week, I wouldn't be surprised if the euro falls below $1.42," said a Japanese bank trader in Tokyo. One possible target for the euro is a 38.2 pct retracement of its rally this year at around $1.4150.
The euro gained 0.5 percent to $1.4389 after a 3.3 percent fall in the past two sessions that took it to a three-week low around $1.4310. It extended losses late on Friday following a German news report, which was later denied, that suggested Greece had raised the possibility of leaving the eurozone.
Against the yen, the euro gained nearly 0.7 percent on Monday to 116.20 yen after falling to a five-week low of 115.23 yen on Friday. The Australian dollar rose 0.6 percent to $1.0750, extending its gains following comments from the Australian central bank that rate hikes will be needed in the future to contain inflation.
Friday's data showing US employers added 244,000 jobs last month, well above economist expectations, also strengthened investor risk appetite, helping higher-yielding currencies such as the euro and the Australian dollar. The data also helped to boost the US dollar against the Japanese yen, though gains were limited as US bond yields have hardly risen on the data. The dollar stood at 80.65 yen, off last week's seven-week low of 79.57 yen, though it is still below Friday's high of 80.95 yen hit after the US payroll data.