LONDON, April 10: The euro recovered slightly against the dollar on Monday, but gains were limited by expectations of further increases in US interest rates, dealers said. The European single currency rose to $1.2120 from $1.2094 late on Friday in New York.

The dollar firmed to 118.31 yen, from 118.29 on Friday.

Prospects of higher American borrowing costs weighed on the euro towards the end of last week. US interest rates, currently at 4.75 per cent, are expected to rise further after a solid US employment report was revealed last Friday.

A continued gradual increase in this probability is likely to underpin the dollar going forward and for this to materialise the economic data from the US will be key, said Derek Halpenny, economist for The Bank of Tokyo-Mitsubishi.

The US economy created 211,000 jobs in March, which President George W. Bush said revealed an “economic resurgence.”

The “non-farm payrolls” figure given by the Labour Department, while down from a revised 225,000 in February, was well ahead of Wall Street’s forecast for 190,000 extra jobs in March.

National Australia Bank currency strategists said the market now sees an 82-per cent chance of the Federal Reserve raising interest rates by a further half point to 5.25 per cent.

Dealers were meanwhile awaiting Tuesday’s outcome of the Bank of Japan’s monetary policy meeting, hoping for clues from governor Toshihiko Fukui in his press conference on when interest rates will rise from close to zero per cent.

The euro was changing hands at $1.2120 against 1.2094 late on Friday, 143.32 yen (143.06), 0.6946 pounds (0.6935) and 1.5753 Swiss francs (1.5733).

The dollar stood at 118.31 yen (118.29) and 1.2996 Swiss francs (1.3007).

The pound was being traded at $1.7444 (1.7435).

On the London Bullion Market, the price of an ounce of gold rose to $596.40 per ounce, from $589.75 late on Friday.—AFP