The euro fell on Monday, still suffering from data on Friday showing Europe's recession was worse than earlier thought, while the dollar fell against other currencies seen as higher-risk. The yen fell broadly after Japan's top finance ministry bureaucrat Kazuyuki Sugimoto said he was watching foreign exchange market moves carefully and that he hoped they would not have a negative effect on the economy.
The news served as a reminder to the market of the risk of Japanese authorities looking to intervene to weaken the Japanese currency if it strengthens too sharply, although any action beyond verbal intervention is viewed as unlikely, analysts said.
The euro stayed under pressure against the dollar after figures on Friday showed a bigger-than-expected contraction in the eurozone economy. However, a recovery in European share prices from earlier falls, rises in US stock futures and gains in oil prices pushed the dollar lower against some currencies seen as higher risk such as sterling and the Australian dollar.
"The most interesting move has been in the yen, which has been coincident with gains in commodities and equities," Barclays Capital currency strategist Adarsh Sinha said. He said the euro had taken some support from European Central Bank Governing Council member Axel Weber reiterating that interest rates at 1 percent were appropriate unless the situation got noticeably worse.
At 1026 GMT, the euro fell 0.2 percent against the dollar to $1.3460. Against the yen, it gained 0.4 percent to 128.85 yen, having hit a session high around 129.22 yen, while the dollar rose 0.6 percent to 95.70 yen, a shade below a session high around 95.91 yen.
In early Monday trade, the dollar had hit a two-month low of 94.55 yen on trading platform EBS, while the euro rose to a new 3-week peak of 126.99 yen. Sterling gained 0.5 percent to $1.5236, as investors brushed off calls for a dissolution of parliament in a latest twist in an expenses scandal involving British lawmakers, as the possibility of a general election seemed slim.
Gains in oil prices helped the higher-yielding and commodity-based Australian dollar jump nearly 1 percent to $0.7556. On a quiet day for data meanwhile, uncertainties over whether the extent and sustainability of any tentative recovery in the global economy lingered at the back of investors' minds, analysts said.
A nascent recovery in equities and riskier assets recently came to a halt as investors questioned just how sustainable any recovery in the global economy will be. With that in mind, market participants will watch Tuesday's German ZEW economic sentiment indicator closely, as well as provisional purchasing managers' indices for the eurozone later in the week.
"The world economy is in a very uncertain mode," Stockholm-based SEB currency strategist Johan Javeus said. "Right now it is difficult for the market to choose which leg to stand on." The yen may also be hit by concerns about the severity of the weakness in Japan's economy remain ahead of Japanese industrial output and gross domestic product data due later in the week, analysts said.