The dollar hit a six-week high against the euro on Monday as investors expect new Federal Reserve Chairman Ben Bernanke to signal that the central bank is not done with its 19-month streak of raising interest rates.
The dollar had jumped to multi-week highs against the euro and the Swiss franc on Friday, recovering from an initial slide after data showed the U.S. trade deficit swelled more than expected in December and ended 2005 at a record $725.8 billion.
Traders said the dollar would likely stay firm ahead of this week's main event for financial markets -- Bernanke's testimony and the release of the Fed's semi-annual report on the economic outlook. Bernanke is due to deliver the report to the House Financial Services Committee on Wednesday, his first public appearance to discuss the economy and monetary policy since becoming chief U.S. central banker.
"It seems people are in no hurry to sell the dollar right now, especially with Bernanke's testimony coming up later in the week," said Katsunori Kitakura, senior forex trader at Chuo Mitsui and Trust Banking.
Mounting expectations the Fed will keep raising interest rates after 14 straight increases to 4.5 percent has helped the dollar rebound from a slide earlier this year, when investors fretted the currency's yield advantage would shrink.
But the yen has recovered from seven-week lows against the dollar as the Bank of Japan has signalled that its super-loose policy is almost certain to end in the next few months and overnight rates could rise slightly from virtually zero.
As of 0600 GMT, the euro was down slightly on the day at $1.1895 after falling as low as $1.1886 on electronic trading platform EBS -- its lowest since Jan. 3.
The dollar was at 117.90 yen, little changed from its level in late U.S. trade on Friday, and well off a seven-week high of 119.40 yen struck earlier this month.
The dollar fell as low as 117.52 yen in early trade, after data showed that Japan's current account surplus rose unexpectedly in December from a year earlier, helped by a recovery in exports. That data helped push the euro below 140 yen, a key technical level that triggered stop loss orders, adding momentum to the yen's rise. The euro was trading at 140.20 yen after dipping as low as around 139.80 yen.
The dollar was at 1.3075 Swiss francs, near Friday's peak of 1.3086 francs, its highest since Jan. 3. The market shrugged off a weekend meeting of Group of Eight finance ministers that focused on energy prices and paid little attention to exchange rates.