LONDON, July 24: The dollar was firm against the euro and yen in lacklustre trading here on Monday following earlier gains in Asia, dealers said.The euro fell to $1.2632 in late European trade, from $1.2696 late on Friday in New York.The dollar rose to 116.66 yen from 116.14 yen late on Friday.

“After the weakness the dollar had from the middle of last week onwards, we had a correction in Asia, which sat with a firmer dollar on Monday,” said Steve Barrow, currency strategist at Bear Stearns.

A dearth of data on both sides of the Atlantic kept trading volumes low.

Currency watchers said more activity was likely on Tuesday when US consumer confidence and existing home sales figures were published.

Towards the latter part of the week, the monthly Ifo survey into German business sentiment and US economic growth information will also attract attention.

The US data will be particularly important as the market's main focus of attention remains the US Federal Reserve's interest rate-setting meeting on August 8.

At Bear Stearns, Barrow said he felt the dollar was likely to move lower against the euro owing to interest rate trends in the United States and Europe.

“The key will be the data coming through but generally speaking we are bearish on the dollar, especially with the Fed coming to the end of the tightening cycle while the European Central Bank (ECB) turns more aggressive,” he said.

The US currency had drifted lower from Wednesday onwards last week in the wake of comments from Fed chairman Ben Bernanke. He expressed concern about moderating US economic growth, while indicating that inflation remained relatively well-contained.

His testimony to US lawmakers reduced expectations of another quarter point interest rate hike from the US central bank in August as well as the probability of any further rate hikes.

The Fed has raised its key Fed funds rate a quarter point on 17 consecutive occasions to 5.25 per cent.

Earlier this month, however, ECB president Jean-Claude Trichet hinted that the European bank would raise rates by a quarter points to 3 per cent at a meeting in early August.

Trichet said the central bank would continue to exercise “strong vigilance” with regard to potential inflationary risks in the eurozone as economic recovery gathered pace and oil prices remained high.

Elsewhere, markets were alert to developments in Lebanon following the arrival of US Secretary of State Condoleezza Rice in Beirut amid a fierce offensive by Israel against Hezbollah in Lebanon.

The euro was changing hands at $1.2632 against 1.2696 on Friday, 147.38 yen (147.43), 0.6830 pounds (0.6825) and 1.5745 Swiss francs (1.5698).—AFP