NEW YORK -- The dollar dropped against most major currencies Monday as traders shifted into riskier bets including stocks, the euro and currencies linked to commodity exporters.
In late trading in New York, the euro climbed to $1.3404 from $1.3232 late Friday. The British pound rose to $1.5871 from $1.5802 and the dollar fell to 83.34 Japanese yen from 83.90 yen. The dollar fell almost 1 percent against an index of six major currencies.
Investors were relieved that China didn't raise a key interest rate over the weekend. China is trying to rein in bank lending and slow down inflation. China ordered its banks to raise their reserves on Friday, the third increase in the past five weeks.
Higher rates are a tool central banks use to fight inflation. Raising interest rates also tends to curb economic growth, and investors worry that slower growth in China will cut demand for the raw materials and goods China imports.
The euro got a bounce Monday. Europe's shared currency has been dropping since early November on fears that the region's debt crisis would spread.
"Right now the news out of Europe is pretty calm," said Joseph Trevisani, the chief market analyst of online currency broker FXSolutions.
The European Central Bank on Monday said that it bought the largest amount of government bonds in the week ended Dec. 10 since July. The ECB is buying bonds of indebted European countries to help bring down borrowing costs and calm debt markets. Greece and Ireland have already been bailed out because their borrowing costs soared, leaving them unable to raise money in the bond markets. Many investors worry that Portugal or Spain could also need an emergency financing package.
Traders had suspected that the ECB had increased its bond purchases, but Trevisani said the ECB's purchases -- worth 2.67 billion euros, or about $3.55 billion -- were on the lower side of traders' expectations, meaning the central bank had not stepped into markets as much as investors had thought.
EU officials are meeting in Brussels this week to discuss the creation of a permanent crisis mechanism for the 16-nation European currency union.
With no immediate sign that the debt crisis is getting worse, traders were more willing Monday to buy currencies they deem riskier than the dollar, such as the euro and currencies of big commodity exporters. A fast-growing economy would need more raw materials to fuel factories and transport goods, so commodity-linked currencies such as the Australian and Canadian dollars tend to rise with global stocks when investors become more willing to take on risk.
The U.S. currency fell to 1.0075 Canadian dollars from 1.0089 Canadian dollars, while the Australian dollar rose to 99.73 U.S. cents from 98.54 U.S. cents.
The dollar fell to 0.9678 Swiss francs from 0.9813 francs.