The dollar fell against the euro and the yen Monday, after the U.S. currency had rallied last week on strong U.S. economic data and expectations of higher interest rates. The 12-nation euro was at $1.2180 in European trading, up from $1.2163 late Friday in New York. The British pound rose to $1.7991 from $1.7961 on Friday. The dollar slipped to 109.85 yen from 110.45 yen, with investors snapping up the Japanese currency as stocks in Tokyo rose to a fresh four-year high on a brighter outlook for the country's economic recovery. Japan's benchmark Nikkei 225 index jumped 165.44 points, or 1.35 percent, to close at 12,457.17 on the Tokyo Stock Exchange on Monday -- its highest close since July 5, 2001. "Without much economic and political news right now, Japan's equity strength is the main driving force, of course, in the yen's favor," said Tetsu Aikawa, vice president of UFJ Bank's derivatives and foreign exchange marketing department. The dollar staged a rally last week as economic reports showed both consumer and wholesale price inflation accelerating in the United States in July, bolstering expectations that the Federal Reserve will continue to lift interest rates. The cost of borrowing has been steady in the euro zone, where growth has been sluggish. Higher rates in the U.S. would boost returns on many dollar-denominated securities, increasing demand for the currency.