The euro moved a little lower against the U.S. dollar on Monday as traders looked ahead to a decision on European interest rates later this week.
The euro bought US$1.2940 in morning European trading, down from US$1.2967 in New York late Friday. The British pound fell US$1.9591 from US$1.9673, while the dollar was down to 120.74 Japanese yen from 121.07 yen.
Both the European Central Bank and the Bank of England are to meet Thursday to decide whether to adjust their key interest rates.
The ECB is expected to keep its interest rate unchanged at 3.5 percent but set the stage for an increase in March.
Higher interest rates, a weapon against inflation, support a currency by making assets denominated in that currency more attractive to investors, reports AP.
"Strong inflationary signals could easily initiate further buying of the relevant currencies," said Tim Wilbraham, a senior foreign exchange trader at CMC Markets in London. "Although there's no absolute consensus that either bank will add a quarter point as soon as this week, such action cannot be ruled out completely."
On Friday, the U.S. Labor Department reported that unemployment in January rose to 4.6 percent and job growth was unexpectedly subdued fitting with expectations that growth in the world's biggest economy will moderate this year.
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