LONDON (AFX) - The euro was softer against most leading currencies in early trade after a weak Ifo business index in Germany.
The index declined for the seventh straight month to 96.5 in December from 97.0 in November, and was down from 99.7 in December last year.
The number comes after a correspondingly weak euro zone manufacturing sector PMI, analysts noted.
Steven Pearson, economist at Halifax sees the index slipping below 97, souring sentiment on the euro.
Although the euro is unlikely to fall below 0.93 usd, it could tumble much further if that key level is breached, he added.
"The falls could turn out to be fairly pronounced," Pearson said. On a slightly more positive note, euro zone December consumer prices, scheduled for release at 11.00 am GMT, is set to show weakening inflationary pressure, analysts said.
The yen regained some ground against the dollar in a mild recovery after seemingly conflicting views from the Bank of Japan and the government regarding the yen's falls had seen the Japanese unit weaken against the dollar.
"The BoJ's latest monthly report appears to be relatively sanguine," proving supportive for the yen, Pearson said.
It also seems like the dollar has been "overbought" against the euro,leading to some adjustment on that front, he added.
Sterling remained mostly rangebound although under some pressure on expectations of a rate cut when the Monetary Policy Committee meets on Feb 7 and 8.