The dollar rose slightly in the first trading session of 2005 on Monday, gaining more than a cent from recent record lows against the euro as investor selling paused ahead of U.S. economic data this week. However, analysts said persistent imbalances in the U.S. economy will likely continue to weigh on the dollar in 2005 after pushing the euro up about 8 percent to record highs last year.
Later on Monday, the U.S. Institute of Supply Management's manufacturing survey is due. A poll forecast the index for December would edge up to 58.1 from 57.8 in November. U.S. non-farm payrolls data is due on Friday.
"The market has been so negative versus the dollar that we would need a very poor outcome on the data to hurt it. Otherwise, people will say 'we already sold the dollar'," said Peter Fontaine, currency strategist at KBC in Brussels.
"So the dollar is torn between two stories, one in the short term, ahead of the data, and the other long-term. In the long-term, we still have problems, the current account and trade deficits in the U.S."
Fontaine added that currency trading was erratic on Monday, with markets in Tokyo and London closed for holidays.
At 0915 GMT the dollar traded at $1.3530 per euro, a quarter of a percent up from its December 31 close. Earlier in the session it rose as far as $1.3389, compared with last week's record low of $1.3667.
The dollar was also a quarter percent up at 102.76 yen and 1.1410 Swiss francs. This compared with last week's nine-year low against the franc and its lowest level since January 2000 against the yen set in December last year.
The greenback traded more than half a percent up versus Australian dollar.
The euro was little moved by news that the euro zone's manufacturing sector picked up speed in December for the first time in five months. The /NTC Research Eurozone PMI rose to 51.4 from a 14-month low of 50.4 in November.
However, the survey also showed manufacturers blaming the strong euro for subdued growth.
The euro extended its decline from last week's record high versus the yen to trade at 138.86 yen, compared with a record high of 141.61 yen last week.
Eric Chong, a technical analyst with Standard Chartered Bank, said the euro's decline on Monday was driven by the euro/yen correction.