Euro trades at $1.4386

The euro was down as low as $1.4257, before rising back to $1.4386 in morning European trading - trading around the $1.4321 level it was at on Dec. 31.

The British pound bought $1.6216, compared to $1.6169 at the end of the year, while the dollar purchased 92.79 Japanese yen, down slightly from the 93.07 on Dec. 31.

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The dollar gained support after Bernanke on Sunday said stronger regulation was the best way to prevent financial speculation from getting out of hand and throwing the economy into a new crisis, but did not rule out higher interest rates to stop new speculative investment bubbles from forming.

Now currency markets are focused on whether the Federal Reserve might interest rates earlier than expected as the recovery advances. Higher interest rates, or the expectation of higher rates, can boost a currency as investor transfer funds to where they can earn higher returns.

Traders were also looking ahead to the release of key U.S. economic data, including a manufacturing survey later Monday and unemployment data on Friday, for indications of the strength of the American economy.