The dollar skidded on Monday in thin trading as investors locked in profits ahead of the Christmas holiday, although losses could be limited by continued uncertainty about the ongoing US budget talks to avert a toxic mix of higher taxes and spending cuts. The greenback tends to benefit as a safe haven from any bad news on the US fiscal front.

The yen also weakened, trading near a 20-month low against the dollar, after incoming prime minister Shinzo Abe heaped fresh pressure on the Bank of Japan to adopt a higher inflation target.

The euro was up 0.2 percent on the day at $1.3212. Offers were cited above $1.3240. It hit an eight-month high of $1.33085 last Wednesday after speculators cut bets against the currency in recent weeks. The dollar index was down 0.1 percent at 79.509. Against the yen, the dollar was up 0.6 percent on the day at 84.68 yen. Chartists said the dollar needed to overcome 85.05 yen, its 200-week moving average, for it to sustain further gains. The yen also fell against the euro. The single currency was up 0.7 percent on the day at 111.85 yen, not far from a 16-month high of 112.59 yen, hit on December 19.

Copyright Reuters, 2012