The euro has been under steady pressure in recent weeks on concerns over debt levels in peripheral euro zone states, and many in the market expect that pressure to remain with some looking for a re-test of this month's low at $1.2969.
One trader reported a mixture of automatic stop-loss sell orders and take-profit orders on the euro in the $1.3165-80 area, just below the euro's trading rate of $1.3200, but with talk elsewhere in the market of more sell stops in that area.
Currency speculators trimmed short positions against the dollar last week but more than doubled their bets against the euro, according to data from the Commodity Futures Trading Commission, signaling growing bearishness on the currency.
"Euro positioning made a determined incursion into short territory last week, for the first time since early September, suggesting the escalating sovereign debt saga continues to take its toll," wrote Gareth Berry, FX strategist at UBS in Singapore. The trader cautioned however that if the market was too heavily short euros at this point, there was the risk of a short-covering rebound.
European Union leaders meet later this week.
But while core euro countries Germany and France have pledged to better align tax and labor policies to foster convergence, they rejected calls for a rescue fund to be increased or for joint sovereign bonds, and the lack of unity over a solution is likely to keep pressuring the currency sporadically.
The euro was 0.2 percent down from U.S. trading levels, at $1.3200.
The dollar has been supported by a rise in Treasury yields following a proposal in the United States to extend Bush-era tax cuts, which is seen as helping the economy, and economic indicators have been improving, if unevenly. Consumer sentiment data on Friday showed confidence at its highest in six months, while the trade deficit narrowed more than expected.
The data fits into a pattern of an economy that is gaining traction after a slowdown and is likely to intensify the debate over whether the Federal Reserve needs to keep stimulating the economy through asset purchases.
The benchmark Treasury yield rose to its highest in six months last week, above 3.33 percent, but the dollar, while supported by the more attractive returns, has not gained much ground against the yen in the same period. It is struggling to maintain any moves above 84.00 yen, holding at 83.96 yen on Monday, unchanged from Friday.
Traders reported Japanese exporters selling dollars at 84.00 to 84.05 yen on Monday. It has resistance up at 84.41 yen, a two-month high set in late November. The high-yielding Australian dollar, which has export ties to China, was steady at $0.9855.
It showed little reaction to a jump in China's inflation rate reported at the weekend after the Asian giant on Friday hiked its reserve requirement ratio, the amount of money lenders must keep in reserve, for the third time in a month. For the latest updates PRESS CTR + D or visit Stock Market news Today
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