The dollar crept higher on Monday, recovering from a dip after surprisingly weak U.S. wages data that gave the vast majority of investors who see a stronger greenback this year room to reload.
Dealers said there had been leveraged demand for dollars from the opening in London, but added the move was happening in minimal liquidity in a market thinned out overnight by a holiday in Japan.
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Friday's wage numbers cast doubt on a key driver of the U.S. currency's ascent over the past six months, questioning why the Federal Reserve should raise interest rates this year in the absence of clear evidence of inflationary pressures.
But the other main reason -- that counterparts in Japan and Europe are headed in the opposite direction -- remains firmly in place. Bank of Italy chief Ignazio Visco warned over the weekend of the risk of deflation in the euro zone and pointed to outright government bond buying as the best response.
The dollar gained 0.3 percent against the euro, over half a percent against the yen and a third of a percent against a basket of currencies.
"This might be a fund executing a dollar-buying strategy but it looks to me to be happening in fairly thin liquidity," said Graham Davidson, a spot dealer with National Bank of Australia in London.
"Very often you see this sort of move early on a Monday and it then peters out quite quickly. I am still dollar positive, but I'm reluctant to get involved at the moment."
The biggest mover in morning trade in Europe was the Norwegian crown, down almost 1 percent against the dollar after another fall in oil prices.
The greenback had eased slightly in Asia as dollar bulls struggled to get over their disappointment at the unexpected fall in U.S. wages.
The dollar struck a one-week low of 118.12 yen but by midday London time it had recovered to 119.25. The euro eased to $1.1802, still well off a nine-year trough of $1.1754 plumbed last Thursday.
With the ECB on the verge of outright printing of new money to shore up the economy, an influential adviser to Europe's top court will give his view on Wednesday about an earlier unused bond-buying scheme.
Some analysts believe that could at least give the bank pause for thought ahead of a meeting at the end of the month but there was little sign of genuine concern that it could derail the move towards buying bonds.
"An adverse or complicated recommendation could generate uncertainty in peripheral (euro zone) markets," strategists from French bank BNP Paribas said in a morning note.
"We think the most likely outcome is a compromise solution, perhaps putting some limitations on OMT (Outright Monetary Transactions) without rejecting it outright. Such an outcome would likely leave markets focused on the countdown to a likely QE (quantitative easing) announcement on January 22." (Editing by Gareth Jones)