Dollar falls in London

The dollar fell on Monday, reversing earlier gains on caution ahead of upcoming US data, which left investors wary of pushing the currency up further after it earlier hit a four-month high versus the yen. Optimism about the prospects for a US recovery have supported the dollar recently but analysts said more evidence of a strengthening economy was needed to justify further gains.
"People are coming back after the new year, but the market has been slow to settle back in and there's a reluctance to chase dollar strength in a week which includes US payrolls data," said Daragh Maher, deputy head of FX strategy at Calyon. By 1243 GMT, the euro was up 0.5 percent against the dollar at $1.4396.
The single currency recovered from earlier falls, which took it as low as $1.4257, testing a key chart support level around $1.4229 where the 200-day moving average sits, and in sight of December's low around $1.4218. A eurozone purchasing managers' survey which confirmed the region's manufacturing sector expanded at its fastest rate in 21 months also helped the euro against the dollar.
The dollar index, a gauge of the greenback's performance against six other major currencies, fell 0.4 percent to 77.554. Against the yen, the dollar was trading down 0.2 percent at 92.82 yen cutting earlier gains which lifted it to a four-month high of 93.22 yen on trading platform EBS. Traders said resistance was seen ahead of its 200-day moving average around 93.60 yen.
Higher longer-dated US Treasury yields had underpinned the dollar, particularly against the yen, traders said, with benchmark Treasury yields rising above 3.9 percent on Thursday, in sight of last year's high around 4 percent. The dollar has moved mostly higher since figures early last month showed the US economy shed a much lower-than-expected 11,000 jobs in November.
"Following the surprisingly positive November labour market report, which led to the recovery of the dollar in December, further key data will now have to confirm the market view that the US economy is experiencing a sustainable recovery," Commerzbank analysts said in a note to clients.