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Dollar falls to four-month low against yen

In early European trade, the single currency climbed to 1.3827 dollars, from 1.3775 dollars in New York late on Friday.

During Asian trade Monday the euro struck 1.3839 dollars, not far from its all-time high of 1.3852 dollars which was reached on July 24.

In early Tokyo trade, the dollar fell to 117.18 yen -- a four-month low.

“The drop in the dollar/yen rate below the 118.00 level in response to the sell-off in US equity markets on Friday has resulted in a fresh spike in foreign exchange volatility,” said Derek Halpenny, senior currency economist at The Bank of Tokyo-Mitsubishi in London.

The dollar remains on the backfoot as heavy losses on Wall Street Friday prompted players to buy back the yen as they reduce risky positions funded with cheap Japanese credit, dealers said.

The dollar was also hit by soft US employment and services data. The US economy created 92,000 new jobs in July, the weakest growth since February and sharply below economist consensus forecasts of 135,000.

The numbers fuelled fears that problems in the weak US housing sector were spreading to the labour market, which until recently had been one of the strongest parts of the economy, dealers said.

“In the beginning, investors were largely focused on risks in the subprime market. Now investors are asking themselves whether the overall US economy is losing steam,” said Kikuko Takeda, currency research manager at Bank of Tokyo-Mitsubishi UFJ.