Investing.com - The euro remained modestly higher against the softer dollar on Monday after data showing that euro zone inflation remained low in August, adding to concerns that the European Central Bank may scale up its stimulus program.
EUR/USD was last at 1.1207, holding below early highs of 1.1262.
Eurostat said the annual rate of inflation in the single currency bloc rose 0.2% in August, unchanged from the previous month, but slightly higher than forecasts of 0.1%.
The ECB targets inflation of close to, but just below 2%.
Core inflation, which strips out food and fuel costs, remained steady at 1.0%.
Last week, the ECB’s chief economist warned that risks to its medium-term inflation target have increased and indicated that the bank is prepared to expand its economic stimulus program if necessary.
ECB Executive Board member Peter Praet said lower commodity prices and signs of economic weakness mean there is an increased risk that the euro area will miss its inflation targets.
The ECB is to hold its next policy meeting on Thursday and President Mario Draghi will announce the latest growth and inflation projections at the post-policy meeting press conference.
The euro and the yen had risen against the dollar earlier Monday as renewed weakness in equities markets overnight pressured the greenback lower.
Chinese shares turned lower after a 10% rally in the previous two sessions, amid renewed concerns over the health of the world’s second-largest economy.
Demand for the euro and the yen was boosted as heightened risk aversion underpinned demand for the low-yielding currencies to fund investment in risk assets.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, slid 0.13% to 96.03, but remained well above the eight-month trough of 92.52 set last Monday.
The dollar’s losses were held in check by hopes that the Federal Reserve may still raise interest rates as soon as next month.
Investors were looking ahead to Friday’s U.S. jobs report for August, which could help to provide clarity on the likelihood of a near-term interest rate hike.
Markets were also awaiting Chinese data on Tuesday which was expected to show that the rate of economic growth is continuing to slow.
The euro was slightly lower against the yen, with EUR/JPY dipping 0.12% to 135.88.
Meanwhile, USD/JPY was down 0.37% to 121.24, off Friday’s highs of 121.73.