The euro backed away from recently-seen highs against the dollar and pound on Monday in New York. Investors mulled details of the U.S. government plan to subsidize private investors' purchase as much as $1 trillion in toxic assets on the books of troubled banks.

The euro fell to a four-day low of 1.3485 against the dollar. Last week, the single currency hit a 2 1/2 month high of 1.3738.

In an interview with the Wall Street Journal, European Central Bank President Jean-Claude Trichet said the central bank could lower its interest rate on main refinancing operations, which currently stand at a record-low 1.5%. However, he also said he does not see any further need to increase current stimulus plans.

The euro slipped to a five-day low of 0.9284 against the British pound, backing away from an eight-week high. The single currency reached as high as 0.9484.

Speaking in London on Monday, Bank of England member David Blanchflower said the UK's recession could last even longer than expected.

The euro was little-changed against the yen, trading near 131.80. Earlier in the morning, the single currency five-month high of 132.26.

Japan's Finance Ministry and Cabinet Office said the large company business sentiment index registered minus 51.3 in the first quarter of 2009, compared to the minus 35.7 reading in the fourth quarter. Negative readings indicate more companies are pessimistic about the economy than are optimistic.

On the economic front, Eurozone's trade deficit widened in January from December, an official report said. Data released by the Eurostat showed that the Eurozone recorded a trade deficit of EUR10.5 billion in January, widening sharply from a revised EUR 1.7 billion deficit in December. Economists expected the trade deficit to be EUR 9 billion in January. Exports plunged an unadjusted 24% year-on-year compared to a 4% fall in December. Imports slipped 23%, after a 6% fall in the previous month.

The Eurostat also announced that the Eurozone construction output rose a seasonally adjusted 1.3% month-on-month in January, compared with a 2.8% fall in the previous month.

Commerzbank AG downwardly revised its forecasts for the German economy, citing the recent collapse of order intake. In a note, Commerzbank chief economist Jörg Krämer said the bank now expects the German economy to shrink 6%-7% this year versus an earlier forecast of 3%-4% contraction.

Further, the bank cut its forecasts for the Eurozone. The 16-nation Eurozone is now seen shrinking 4.5% this year versus the earlier forecast of 2.5%-3% contraction. Other main Eurozone economies, France, Italy and Spain are expected to shrink 3.5%, 4.5%, 4.6%, respectively this year.

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