Investing.com

Investing.com - The dollar pulled away from two-month highs against the euro on in subdued trade Monday, while the Australian dollar recovered from three-and-a-half year lows helped by fourth quarter growth data out of China.



EUR/USD touched lows of 1.3508, the lowest since November 25 before recovering ground to trade at 1.3560, 0.17% higher for the day.



The euro’s gains were held in check by concerns that the subdued inflation outlook for the euro zone may prompt the European Central Bank to ease monetary policy in order to safeguard the fragile recovery in the region.



Demand for the dollar continued to be underpinned after recent U.S. economic data reinforced expectations that the recovery is strong enough for the Federal Reserve to make further reductions to its asset purchase program at its policy meeting later in the month.



USD/JPY hit lows of 103.87, the weakest since January 14 and was last down 0.28% to 104.02.



Trade volumes were expected to remain thin on Monday, with U.S. markets closed for a holiday.



The dollar slipped lower against the pound and the Swiss franc, with GBP/USD rising 0.12% to 1.6441, and USD/CHF dipping 0.07% to 0.9095.



Australia’s dollar recovered from three-and-a-half year lows, with AUD/USD rising 0.40% to 0.8814.



The Aussie found support after data on Monday showed that China’s economy grew 7.7% on a year-over-year basis in the fourth quarter, slowing from 7.8% in the previous quarter, but still above the 7.6% forecast by economists.



Meanwhile, NZD/USD edged up 0.03% to trade at 0.8259, after falling as low as 0.8211 earlier.



Elsewhere, USD/CAD slid 0.17% to 1.0946, not far from the four year high of 1.0990 struck last Wednesday. The loonie, as the Canadian dollar is also known, remained under pressure amid expectations that the Bank of Canada will stick to its dovish stance on rates at this week’s policy meeting.



The U.S. dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.18% to 81.20.



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