The dollar was mostly firmer on Monday as a drop in oil prices gave added impetus to dealers paring positions after the dollar's recent brush with historic lows. "With lower oil prices, we are seeing a dollar positive factor. However, we are not really getting a dollar rally. Rather, what we are getting is a pause in the sell-off that we've grown to expect and grown to accept," said Joe Francomano, vice president at Erste Bank in New York.
US oil prices fell more than $2 a barrel to nearly $45, its lowest in two months, before cutting losses to stand about 1 percent lower in the session at $46.87.
The dollar was 0.64 percent stronger at 1.1790 Swiss francs, more than recovering the losses suffered on Friday when renewed worries about instability in the Middle East sent the safe-have Swiss franc sharply higher.
The euro was off 0.24 percent at $1.2943 while sterling was 0.55 percent weaker at $1.8463.
The dollar was 0.27 percent weaker against the yen at 105.25 yen, just above fresh seven-month lows of 105.18 yen plumbed overnight.
Lower oil prices depressed the Canadian dollar because Canada is a net oil exporter. By late afternoon in New York, the US dollar was up 0.66 percent at C$1.2000.
Daniel Tenengauzer, senior G10 currency strategist at Lehman Brothers in New York, said the dollar was primed for a correction because the market had been unloading dollars for some time.
"The whole thing is getting stretched, and if you are one to go against the trend, positioning and sentiment is telling you that this would be a good time to do it," he said.
Data showed the market remained very short of dollars.
According to the Commodity Futures Exchange figures released on Monday, currency speculators on the Chicago futures market added to their net long euro positions in the week ended November 9, hitting a second consecutive record.
"Long" positions are de facto bets a specific currency will strengthen, while "short" positions are effectively bets it will weaken.
The dollar has been under heavy downward pressure in recent weeks as dealers become increasingly concerned about the widening US current account gap.
As the deficit widens, more dollars must come into the economy in the form of portfolio inflows. If inflows are not big enough to offset the dollars going offshore to buy foreign goods, the dollar will weaken.
With that in mind, dealers said they were keenly awaiting data on capital inflows into US assets to be released on Tuesday by the Treasury Department. The September data are expected to show that flows were not enough to offset the current account deficit that month, a result that is likely to be negative for the dollar.
Dealers also were keeping an ear out for comments about the appreciating euro from European finance ministers, who are meeting in Brussels on Monday and Tuesday.
European Central Bank board member Tommaso Padoa-Schioppa said on Monday he didn't believe the market had a one-way bet on the euro, and echoed ECB president Jean-Claude Trichet's comments that the currency's recent spike up was "brutal" and unwelcome.
European Union monetary affairs commissioner Joaquin Almunia said "it's not good for anybody" to have the currency swings of recent weeks, which saw the euro hit a lifetime high of $1.3005 last Wednesday.
Belgium Finance Minister Didier Reynders said a rise above $1.30 would be worrying, while noting that disequilibrium in the United States was to blame for the dollar's weakness.
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