The dollar rose from multi-year lows against the euro in thin holiday trade yesterday, as investors waited to take their cues from developments in the Gulf and US earnings news later this week.

The move up was muted by the Martin Luther King day holiday however, with the dollar eventually falling back to the three-year low against the euro of $1.0679 hit on Friday after the release of a range of disappointing economic data.

In subdued activity, the euro slipped to $1.0663 in early trading, a loss of just 0.05 per cent compared with the previous New York close and just underneath Friday's high.

The dollar has been falling virtually without interruption since early December as the prospect of a US-led war against Iraq has exacerbated concern over the United States' precarious funding situation.

Not only would a costly military campaign aggravate the US budget deficit, but any surge in risk aversion could dampen international capital flows, making the country's massive current account deficit harder to finance.

Data on Friday showed a ballooning US trade deficit, a drop in industrial production and an unexpected slide in the University of Michigan's consumer sentiment survey. - (Reuters)