European shares fell and U.S. stock futures signaled a lower open after disappointing results from UBS and a shake-up of UK banks Lloyds and Royal Bank of Scotland prompted investors to cut back on risk.

“We saw investors focus once again on the health of the banking sector and that of course has tended to undermine riskier assets,” said Omer Esiner, senior market analyst at Travelex Global Business Payments in Washington.

“Stocks were generally lower and that has rekindled demand for safe-haven, low-yielding assets like the dollar and the Japanese yen,” he added.

In early New York trading, the ICE Futures U.S. dollar index, a measure of the greenback’s value against a basket of six major currencies, rose 0.6 percent to 76.728, after earlier climbing as high as 76.817, its highest level since early October.

The euro fell about a full percent on the day, hitting a four-week low of $1.4627, according to Reuters data and reversing Monday’s gains made on firm manufacturing data.

Some attributed losses in banks shares and the euro partly to European Commission estimates of bank losses renewing anxiety over the sector’s health.

The EU Commission quoted results of stress tests in the banking sector, published in early October, which said losses could amount to 400 billion euros ($585.2 billion) in 2009-2010.

The euro fell 0.9 percent to 132.14 yen while the dollar dropped 0.1 percent against to 90.23 yen.

Some traders said profit-taking on risk assets, already seen in equities, could materialize ahead of funds’ book-closings as the year-end approaches, and that this may offer an additional boost to the dollar.

“Year-end position liquidation could also prove disruptive to capital markets as investors crystallize this year’s gains,” said Geoffrey Yu, currency strategist at UBS in London.

Wary ahead of fed, jobs report

Traders remained wary ahead of big scheduled events this week. The U.S. Federal Reserve starts a two-day policy-setting meeting on Tuesday and the European Central Bank and the Bank of England also hold policy meetings later in the week. Key U.S. jobs data is due on Friday.

The Fed, which will announce its decision on Wednesday, is expected to keep its benchmark interest rate unchanged near zero. Investors will focus on the interest rate outlook, but many analysts say the Fed is unlikely to change the wording of its pledge to keep rates low for an “extended period”.

“The banking system is still very soft globally. I don’t think the Fed is going to be in a big hurry to do anything about interest rates going forward and certainly in their language I don’t expect any changes,” said Andrew Busch, global FX strategist at BMO Capital Markets in Chicago.

The Australian dollar fell 0.9 percent against the U.S. dollar to US$0.8954, extending losses after the Reserve Bank of Australia raised its cash rate for the second month running as expected, but left markets guessing if it would raise rates again as soon as December.

Markets were still pricing in the chance of a 25 basis point increase in December, albeit a reduced chance.

Sterling tumbled to a one-week low against the dollar after the UK Treasury announced a shake-up of British banks, which raised concerns about the financial sector. The pound was last down 0.5 percent at $1.6298.