The dollar retreated against most of its counterparts on Monday after Fed chairman Ben Bernanke warned that the U.S. economy remains fragile and the unemployment rates could stay at a high level for some time even though the economy has improved. He also said that the Fed is still looking at an 'extended period' of low interest rates as inflation is expected to remain stable.

Short-covering by short-term speculators pushed euro as high as 1.4906 in Asia with traders seen taking profits following Friday's selloff to 1.4821 on U.S. better-than-expected jobs report. The single currency tumbled to an intra-day low of 1.4756 after triggering sizeable stops below 1.4800 due to the selloff in European equities. The pair then rebounded from there after Bernanke's dovish remarks on the dollar before another retreat was seen in New York afternoon.

Cable rebounded in Asia on short-covering after sterling nose-dived to 1.6422 on Friday (trading volume was relatively thin with no major data out of the U.K.). The British pound then tumbled to a low of 1.6314 in tandem with euro due to dollar's broad-based firmness. In New York morning, cross buying in sterling versus euro lifted cable as eur/gbp fell from 0.9063 to 0.9008.

Data to be released on Tuesday include Japan current account economic watch DI, leading indicators, Australia NAB business confidence, U.K. BRC retail sales, industrial production, manufacturing production, German industrial production, Canada BOC rate decision and housing starts data.