The dollar gained ground today amid concern that recent selling sparked by expectations the Federal Reserve could pause its two-year run of rate rises was overdone.
Some analysts also cited relief buying of the US currency as euro zone government bonds fell. The bonds' movement came after Israel today
said it was prepared to back the deployment of a temporary international peacekeeping force in southern Lebanon.
The dollar slid last week after Fed Chairman Ben Bernanke said US inflation was likely to ease in coming quarters as growth slows, prompting market players to scale back the chance of another rate increase.
Earlier this morning, the euro had fallen 0.5 per cent to $1.2630. The single currency was still above a three-month low of $1.2456 hit last week.
The dollar rose half a per cent on the day to 116.64 yen but was still off a three-month peak of 117.88 yen hit on July 19th. The euro was down 0.1 per cent at 147.38 yen but still near last week's record high of Yen 147.90.
Market players judged that Mr Bernanke's comments last week raised the likelihood that the Fed might leave overnight rates steady at its policy meeting on August 8th rather than raising them for an 18th straight time.
The Fed has said its next move will depend on US economic data. This week's slate includes consumer confidence, home sales and durable goods, and second quarter economic growth figures on Friday.