The euro lost some ground in early trade in New York when dealers, already disappointed with the euro's failure to hold recent gains, tried to push it toward parity with the dollar again.
By late European trading, the euro's losses had widened to over half a per cent against the yen and it swung to small losses against the dollar, heading back toward the session's low at $1.0044.
"Trading is generally very quiet today and it does not take much to move the market. There has been some talk that US corporates have been interested in selling the euro just as there has been talk that Japanese financial institutions are in buying the yen," said Mr Jeffrey Yu, senior trader at Sanwa Bank.
Some dealers expect the euro may dip below one-to-one with the dollar again on Monday.
"We are very much into the holiday season and the euro and yen seem trapped in ranges even though the euro could drop again if stops are triggered said Bank Julius Baer currency strategist Mr David Durrant.
The euro fell within half a cent of parity against the dollar overnight when dealers expressed disappointment with the new currency's failure to hold last week's gains.
On Friday, the euro had stretched to a one-week high of $1.0246, before speculative selling from US and European banks saw it fall back, ruining yet another bid for recovery.
The Bank of France Governor Mr Jean-Claude Trichet briefly helped lift the euro yesterday, when he said it had room to appreciate. However, resistance near the psychologically key $1.01 level proved too tough and the currency soon came off.
With little economic news, dealers said they would await the Federal Reserve's decision on US interest rates today before staking out new territory.
Nonetheless, there is still room for exaggerated moves on Monday as a few trades could trigger automatic sell orders in thin yearend conditions.
Analysts said only a breach of key chart resistance located around $1.03 could give an incentive to market bulls for betting on the euro.
Traders said there was little currency market reaction to the resignation of the Italian Prime Minister Mr Massimo D'Alema over the weekend. They noted this had been Italy's 56th government since World War II with the next government likely to be headed by Mr D'Alema again.
Furthermore, Italy's budget for 2000 had been passed last week and there was no immediate fallout from the power vacuum.
Looking ahead to today's US Federal Open Market Committee meeting, billed as the week's biggest potential market mover, dealers bet on no move, saying the Fed is unlikely to raise rates this close to the Y2K deadline.
But a Reuters poll of 30 primary dealers on Friday found 20 expected the central bank to drop its current neutral policy stance and adopt a tightening bias, which would put the market on warning about its intentions next year.
Analysts said sentiment remained generally positive toward the dollar given the string of recent data showing the US economy was growing at a fast pace without generating significant inflation.
