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The dollar was only modestly weaker versus other major currencies on Monday, even after Abu Dhabi stepped in to rescue fellow emirate Dubai from its debt crisis, fueling a bit of risk appetite.
Global stocks gained, but the dollar managed to hold its ground versus the higher-yielding euro. Meanwhile, the buck came under some pressure versus the sterling and loonie, giving back its overnight gains.
The sterling was lifted by the Dubai news, as a number of key UK banks were the most exposed to the overstretched emirate's debt. At the same time, resource-linked currencies got a lift from stable commodities prices.
Against the euro, the buck stayed within a penny of a 2-month high of 1.4585 set Friday. Decent economic news had been hurting the dollar in favor of riskier currencies, but of late, traders are betting that the Federal Reserve may act to tighten monetary policy sooner than later, giving the greenback a lift.
The number of persons employed in the euro area fell by a seasonally adjusted 0.5% in the third quarter compared with the previous quarter, the Eurostat reported Monday.
The dollar dropped to 1.6310 versus the sterling, extending its run of very choppy trading. Amid uncertainty about the health of the UK economy, the pair has bounced back and forth in a range between 1.6000 and 1.7000 for most of the last few months.
House prices in the United Kingdom dropped for the second straight month in December, a closely watched survey revealed on Monday.
Oil prices fell no further after sliding below $70 a barrel, and the dollar slipped back to C$1.0570 against the loonie, down almost a cent from its early highs.
Versus the yen, the dollar held near Y88.50. Last month, the dollar hit a 1995 low of 84.80 before finding its footing.
Looking ahead to Tuesday, producer price data will give the markets a reading on inflation. Then on Wednesday, the Federal Reserve will likely give a nod to signs of recovery but maintain its record low interest rates.
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