Thin holiday trade and a late-day bounce in U.S. stocks helped the euro retrace all of its losses against the dollar from the previous week.
The Dow Jones Industrial Average finished above its intraday low, supporting the risk appetite trade out of the dollar, a funding currency. The euro had already strengthened overnight, ahead of key U.S. first-quarter earnings releases expected later this week. In the coming days, JPMorgan Chase (JPM), Citigroup (C) and others are scheduled to report earnings.
Technical trading was also likely a major factor in allowing the euro to advance more than two U.S. cents over the course of Monday's session. More traders hopped on as the currency broke through technically important levels, further extending the euro's rally.
But currency movements were likely exaggerated with many markets, including much of Europe, still shut for the Easter holiday. Thin trading conditions often result in volatility.
The euro gained as high as $1.3395 and Y134.02, its highest levels since last Tuesday.
The dollar was also sold against the yen. It fell to a two-session low of Y99.86.
U.S. data that could swing currencies again on Tuesday include March retail sales and the producer price index.
Monday afternoon, the euro was at $1.3376, well above $1.3142 late Friday. The dollar was at Y100.04, down from Y100.38, according to EBS. The euro was at Y133.82, up from Y131.95. The U.K. pound was at $1.4869. Data for the pound were unavailable Friday due to the holiday. The dollar was at CHF1.1314, down from CHF1.1579.
Sentiment on the euro-dollar pair have been in flux since late March on equally uncertain economic outlooks for both the euro zone and U.S. This had led the pair to fluctuate back and forth inside a range without any clear direction yet.
Meanwhile, the Australian dollar, another risk-positive currency that has been rallying for more than a month, rose to its highest level since October at $0.7323.
Besides technical positioning, the Aussie dollar was also aided by a report that showed Chinese lending rose to a record high in March. China is a major trading partner of Australia.
China's broadest measure of money supply, M2, surged 25.51% at the end of March from a year earlier as new yuan loans hit a new monthly record high, government data showed Saturday.
China's central bank on Sunday said it would ensure there was enough credit to meet the needs of the economy. While the PBOC said it was sticking to a moderately loose monetary policy, it wants the credit to go to the right sectors and said it would control loans going to the wrong ones.
The Canadian dollar also mounted a significant advance Monday, rising to its highest level since the beginning of February on the rebound in riskier trades in a thin market.
The U.S. dollar fell to C$1.2166 from C$1.2256 late Thursday.