The euro hit a one-month high on Monday, heading toward $1.50 ahead of a European Central Bank policy meeting later this week, an upward march that could bring commodity prices and emerging market currencies along with it.

The weakest U.S. jobs growth in eight months in May has knocked the dollar lower across the board and pushed down Japanese stocks to a two-month low, confirming for investors that the global business cycle has shifted to slower growth and a defensive stance in portfolios is desirable.

The falling dollar has in turn pushed up the euro, which despite no solution in sight for the euro zone's debt crisis may find some traction this week and support commodity prices.

Follow the U.S. jobs data, the two outstanding questions for investors are if the synchronized slowdown reflected in industrial indicators around the globe is a warning of something worse on the horizon and whether monetary policy can again come to the rescue of major economies.

For that reason, this week's meetings of the ECB, embroiled in questions about the need for more Greece aid, the Bank of England, the Reserve Bank of Australia and the Bank of Korea will be focal points for investors.

The euro was steady at $1.4633 after earlier hitting a one-month high above $1.4650 in the wake of the May U.S. payrolls data on Friday. The euro has bounced nearly 4 percent in the past three weeks, helped by hopes that Greece is close to securing billions of euros in aid.


A new aid package for Greece could cost more than 100 billion euros ($144 billion), German news magazine Der Spiegel said in its latest issue to appear on Monday.

Even with tens of thousands of Greeks taking to the streets to protest austerity measures yet to become law and European leaders still debating what to do about the country's mountain of debt, traders have been growing increasingly numb to the news flow surrounding Greece.

After speculators slashed their net long euro position in the International Monetary Market to a fifth of what it was a month ago, market positioning is not standing in the way of a further rebound in the common currency.

The next major obstacle for the euro on charts is $1.4710 -- the 76.4 percent retracement of the move down from $1.4940 to $1.3968. Given the negative sentiment building against the dollar though, $1.50 may draw the euro like a magnet.

The ECB may take the opportunity on Thursday after its policy meeting to prepare markets for an interest rate increase in July, an outcome that would widen rate differentials into the euro zone's favor.

The ECB is likely to send a relatively hawkish message -- after all, growth in the euro area has been amongst the most resilient (and data surprises the least negative), Barclays Capital strategists said in a note.

It is therefore quite possible that the euro retests higher levels, especially against the backdrop of an improvement of the picture for peripheral bond markets.

The euro has drawn the attention of global investors because of how closely other markets have been tracking the currency's ups and downs.

The positive correlation between the euro and the Reuters-Jefferies CRB index of 19 commodity prices <.CRB> was running at more than twice its historical average, suggesting the strong likelihood that euro strength also will mean strength in commodities prices.


Japan's Nikkei share average ended down 1.2 percent <.N225>, its lowest close since March 18.

Fast Retailing <9983.T>, operator of the Uniqlo clothing chain, was the biggest drag on the Nikkei, down 2.7 percent, erasing Friday's gains. Shares of Tokyo Electric Power Co <9501.T>, operator of the crisis-plagued Fukushima Daiichi nuclear plant, plunged 25 percent on fears of being delisted.

For Japan's stock market, a significant issue is whether valuations can contract any more than they already have in an economy waylaid by natural disasters and political ineffectiveness. Japanese equities were trading at 0.7 times current book value, Thomson Reuters StarMine showed, the second cheapest market in the G20. Italy is the only cheaper market.

What other major global stock markets are undervalued to this extent? said Kenichi Hirano, a strategist at Tachibana Securities. The U.S. market may have entered a correction phase, but the Tokyo market may not follow suit.

Markets in China, Hong Kong, Taiwan and South Korea were closed for a long holiday weekend, but traders were on watch for further tightening measures by China's central bank.

In commodities markets, U.S. crude futures inched lower but could resume a climb with the dollar's outlook darkening.

The July contract was down 0.2 percent at $100.05 a barrel.

Gulf Arab OPEC members led by Saudi Arabia look like they will push for an increase in supplies on Wednesday in an effort to support flagging world economic growth by bringing crude prices back below $100 a barrel. These expectations, however, have not had much a downward impact on oil prices yet.

(Additional reporting by Ayai Tomisawa in TOKYO and Reuters FX Analyst Krishna Kumar in SYDNEY; Editing by Ramya Venugopal)