The dollar eased from multi-month peaks scaled earlier on Monday as rising oil prices and robust European Central Bank inflation comments prompted investors to take profits on the US currency's recent clamber higher.
But analysts said the euro's snap back above the $1.50 mark from near-six month lows could prove to be short-lived, as markets assess how hard the slowdown blighting the US economy would hit the rest of the world.
The euro, which last week suffered its biggest weekly fall since its 1999 inception, fell almost as low as $1.49 earlier on Monday as downward technical momentum intensified. It later rebounded above $1.50.
Strong anti-inflation comments from a leading European Central Bank policymaker and a rebound in oil amid fighting between Russia and Georgia took some gloss off the dollar's rally, giving traders an excuse to cash in on the month-long fall in commodities and dollar's latest surge. "Markets have been trading off the commodity sphere and oil prices finding a little base of support. That helped to drag euro/dollar back to the top side while the Liebscher comments amplified the move," Rabobank markets strategist Jeremy Stretch said.
ECB Governing Council Member Klaus Liebscher's warning that inflation remained high reminded investors the ECB's main concern was still to tame inflation.
But ECB President Jean-Claude Trichet's judgement last week that the eurozone economy was facing tough times confirmed that the rest of the world is not immune to the economic pain being endured in the United States. At 1018 GMT, the euro was up 0.1 percent on the day at $1.5022, rebounding from the near six-month low of $1.4908 on the EBS platform in early Asian trade.
The dollar index, a measure of the greenback's value against a basket of six currencies, was trading at 75.744. The index hit a six-month high of 76.192 earlier on Monday. The euro's weakness against the yen, meanwhile, helped keep the dollar down against the Japanese currency, off 0.25 percent on the day at 109.88 yen.