Problems overseas and the SEC's civil fraud suit against Goldman Sachs Group Inc. weighed on investors' appetite for risk, drawing them to the perceived safety of the US currency, said Dan Cook, senior market analyst at IG Markets.
Meanwhile, a surge in the Conference Board's leading indicators hinted that the economy's recovery was becoming more broad-based, said Michael Woolfolk, senior currency strategist at Bank of New York Mellon. That underscored market expectations that the Federal Reserve would begin raising interest rates in the second half of this year.
Higher rates tend to boost a currency.
In afternoon trading in New York, the 16-nation euro slipped to $1.3466 from $1.3497 late Friday. The British pound dropped to $1.5285 from $1.5394, whle the dollar rose to 92.30 Japanese yen from 92.13 yen.
Talks on the bailout package for Greece scheduled for Monday were postponed until Wednesday because of the global travel chaos caused by Iceland's volcano. Greek borrowing costs hit a fresh record high as investors worried about whether the bailout proposed by European finance ministers could save Greece from default. The plan is designed solely for Greece, and would not help other heavily-indebted European countries if they faced default.
Debt problems in Greece and other European countries using the euro, such as Portugal, have weighed on the continent's common currency for months. It traded above $1.51 just last November.
Meanwhile, the suit against Goldman, in which the Securities and Exchange Commission alleges that the investment bank defrauded its investors, could become part of a broader regulatory crackdown on the financial sector, said UBS analyst Geoffrey Yu.
The uncertainty of the extent of the investigation and what penalties banks might have to pay is weighing on markets, helping boost the US currency.
In other trading, the dollar gained to 1.0642 Swiss francs from 1.0615 francs, and rose to 1.0180 Canadian dollars from 1.0145 Canadian dollars.
