The siege against the dollar seen Monday and last week is likely to persist several weeks as dollar-negative sentiment pushes the euro up to the $1.25 to $1.26 range, analysts said. But the bloodletting shouldn't weaken the dollar much beyond that point because the currency remains protected by favorable rate differentials and intense foreign demand for U.S. assets, they said. At noon the euro rose 1.2% to $1.2281 as the dollar shrank more than 1% to 114.68 yen. On Monday, the dollar was surrounded by exceptionally negative sentiment, linked to new speeches from Federal Reserve and European Central Bank officials seen as suggesting that the difference between U.S. and euro-zone rates could shrink this year. A clutch of unnerving unfolding political situations also weighed on the dollar. The list includes Iran's nuclear strategy, unclear debt repayment plans on the part of Russia, Canadian elections, an audiotape last week from al-Qaida terrorist Osama bin Laden and climbing crude prices. The dollar has been under pressure in much of the year to date, due partly to rising indications that the Federal Reserve intends to wrap up its rates hikes program in the near future. On Jan. 3, when U.S. banks reopened after the New Year's holiday, the dollar began the year at around 117.49 yen and the euro started at about $1.2014. John Kosar of Asbury Research in Chicago said technical considerations led him to establish a near-term estimate that the euro will rise to $1.25. He noted that institutional investors, who have deep pockets and tend to make accurate predictions, have begun to buy into the dollar's decline. In Kosar's view, institutional investors have a better track record for calling currency moves than retail investors. Michael Cairns, a senior currency strategist at Forex Solutions, is targeting the euro in the near-term at $1.26. The euro has attracted support from growing speculation that the eurozone could start tightening rates at a time when the U.S. is on the verge of ending its increases, Cairns said. Most recently, European Central Bank council member Christian Noyer Monday said the ECB will do everything necessary to maintain price stability, according to Action Economics. ECB executive board member Lorenzo Bini Smaghi over the weekend said he believes the ECB must act in response to data on a month-by-month basis. Although neither central banker outright said there would be more ECB rate hikes, their remarks were seen as unusually aggressive. But Cairns said he thinks European growth is too sluggish to allow the central banks to justify more than two quarter-point increases this year. The ECB's key financing rate stands at 2.25%. By contrast, the Fed funds target currently stands at 4.25% and is widely expected to rise to 4.5% later this month. Many analysts expect the rate hikes to wind up later this year with the key rate at either 4.75% or 5%, which would place it at a substantial advantage over both the euro and other currencies, Cairns pointed out. In addition, foreign appetite for U.S. assets remains substantial and should help keep the dollar at higher levels throughout the year, according to Michael Woolfolk, a senior currency analyst with The Bank of New York. Woolfolk also said the dollar's fortunes could improve as the week wears on, if U.S. data reports prove strong and overshadow the worrisome political developments.