The dollar edged higher as the euro and the pound succumbed to profit-taking after surging following Friday's weak ISM survey on US manufacturing activity. The pound, which hit a fresh 14-year high of 1.9849 usd late Friday, was particularly vulnerable to profit-taking as it approaches the all-important 2 usd mark, but sentiment towards the dollar remains negative and further falls are expected during the week. "Although the market afforded the dollar some respite in the Far East today, the currency has been robbed of support from a recent spate of particularly disappointing US economic data releases," said Neil Mellor at the Bank of New York. Friday's ISM report, which showed a contraction in manufacturing activity for the first time in three and a half years, led to increased confidence in the market that the Federal Reserve will start cutting interest rates early next year. This week there is little respite in sight for the dollar, with Friday's US non-farm payrolls report expected to reveal further weakness in the US jobs market. "Although technical indicators are suggesting that the dollar is beginning to look oversold we do not see an end in sight to the dollar's pain, with the currency on track to end the year in very weak shape," said Mitul Kotecha at Calyon. Meanwhile, the euro is set to remain firm ahead of Thursday's interest rate decision by the European Central Bank, where a further quarter point hike to 3.50 pct is fully expected. The single currency hit a new 20-month high of 1.3369 against the dollar overnight as well as a new record high against the yen of 154.19. The Bank of New York's Mellor noted that with the prospect of a further Bank of England rate rise in the first quarter of next year still open to debate, and with the currency approaching the key 2 usd level, the euro is likely to gain the most from the dollar's falls for the time being.