Wariness of central bank intervention also supported the single currency, given the three days on which the European Central Bank intervened alone in the last two weeks and a Group of Seven finance ministers' meeting in Paris on Tuesday. Overall, the market remained gripped by the US election saga, with traders assuming that a manual recount in four Florida counties would favour Democratic candidate Al Gore, although Republican George Bush's lawyers were trying to block the count in the courts.

"The US political development seems to be getting more litigious, so from that perspective there's concern that you get a policy paralysis. That's holding back the dollar a little bit," said treasury economist of Standard Chartered Bank Claudio Piron in London. The euro was trading at $0.8643/47, up nearly half a cent from Friday's closing levels. It was at 93.20/25 yen, up a quarter yen on the day.

The yen was undermined by expectations that Japan's opposition parties would soon submit a no-confidence motion against Prime Minister Yoshiro Mori's government and reformists within Mori's Liberal Democratic Party would either abstain or possibly even vote for it.

While the yen could benefit from a more reform-minded leader in the long term, the political uncertainty cast the yen into gloom for now.

In addition, the yen was hampered by a drop of more than two per cent in the Tokyo stock market's Nikkei average. The Japanese currency briefly fell to its lowest against the dollar in more than a week during Asian trading.

Dollar/yen rose as high as 108.05, according to Reuters data, before retreating to around 107.83/86 by early European trading, virtually unchanged from late Friday levels.

(Reuters)