Dollar steadies versus euro

The dollar steadied against the euro on Monday, holding gains after recovering from a near-record low hit late last week as a surprise rebound in the US factory sector offset data showing the US economy's first job losses in 4-1/2 years.
The Australian dollar reached a three-month high versus the US currency, bolstered by expectations the Reserve Bank of Australia will lift interest rates to an 11-year peak of 7 percent week to check inflation pressures. Data on Monday showed annual inflation in Australia accelerated to a 20-month high in January, while house prices posted double-digit gains in 2007, adding to expectations for a RBA rate rise on Tuesday.
A surge in Asian stock markets helped underpin higher-yielding currencies against the low-yielding yen as market players shifted back into carry trades. Japan's Nikkei share average rose 2.7 percent, while the Shanghai Composite jumped more than 7 percent.
Stock market moves have been a big driver for currencies, since investors see equity markets as a barometer for risk. Trading activity in Asia was subdued as many investors in the region are away this week for Lunar New Year holidays. The euro edged up 0.1 percent from late Friday US trade to $1.4814. The single European currency hit a two-month high of $1.4956 on Friday, just below a record peak of $1.4968 struck in November.
The dollar has been stung by two hefty interest rate cuts by the Federal Reserve last month, along with fears of a recession and the potential for more US financial firms to suffer credit losses from problems at bond insurers.
The dollar climbed 0.2 percent against the yen to 106.83 yen keeping some distance from a three-year low of 104.95 yen struck on EBS last month. The Australian dollar rose 0.2 percent to $0.9050 and hit a three-month peak of $0.9055 on the Reuters dealing system.
The euro was up 0.3 percent on the day versus the yen at 158.25 yen. Friday's data showed that the world's biggest economy shed jobs in January for the first time since August 2003, stoking fears of a recession. That initially sparked a dollar sell-off.
But data from the Institute for Supply Management showing stronger-than-expected manufacturing activity in January prompted dealers to book profits on their bets against the dollar. "Friday's factory data led some investors to believe the economy might avoid a recession, although such views are not yet widespread," said Tsutomu Soma, a senior manager of foreign securities at Okasan Securities.
Investors remained careful about taking fresh positions too aggressively as they awaited central bank meetings by the Bank of England and European Central Bank later this week, in addition to that of the Australian central bank. A quarter-point rate cut by the BoE this week to 5.25 percent is seen a done deal, while the ECB is expected to stand pat at 4 percent after a meeting on Thursday. "Dealers are just waiting for a chance to sell sterling given the rate expectations in England," said a senior trader at a big Japanese bank. Sterling edged up 0.1 percent to $1.9668 against a one-month high of $1.9960 reached last week.