The euro edged up against the dollar on Monday after falling following a downgrade in Spain's credit rating by Fitch Ratings which revived concern about Europe's debt woes and their impact on the global economy.
But investors avoided building positions up as the United States and the UK are on holiday on Monday. Some month-end dollar demand emerged against the yen but Japanese exporters were expected to sell into moves up to 91.50 yen, traders said.
The euro is on track for a fall of more than 7 percent against the dollar in May, in what would be its sixth straight monthly fall and the biggest percentage drop since January 2009.
Traders say euro support lies at this month's four-year low of $1.2143 and then around $1.2135, a 50 percent retracement of its 2000-08 advance. It stood at $1.2325 on Monday.
"The sell-off in the euro/dollar (on Friday) was not panic selling and the currency seems to be stuck in a range, although worries about Europe's debt trouble still persist," said Satoshi Okagawa, head of forex and money trading at Sumitomo Mitsui Banking in Singapore.
Market attention is shifting to the U.S. employment report for May due on Friday to see whether it can help market sentiment when concerns about Europe's fiscal problems continue, traders said.
"The market is waiting for the jobs data to see if the U.S., whose economic figures are relatively firm, could provide support for the global economy," Okagawa said.
Fitch cut Spain's credit rating by one notch to AA-plus on Friday, saying the country's economic recovery will be "more muted" than the government forecast due to its austerity measures. The outlook on the new rating is stable.
The euro rose 0.4 percent to $1.2325 but selling was expected above $1.2400, a trader at a major Japanese bank said.
Charts indicate a monthly close below $1.2135 would favour additional weakness, with the next downside support seen near $1.1640 — a trough hit in November 2005.
The euro rose 0.7 percent to 112.68 yen, having fallen 0.7 percent on Friday.
"People are also watching to see if the EU can reassure markets that it is unified over the fiscal problem and if international cooperation can be implemented when fears about the financial system deepen," said Ayako Sera, market strategist at Sumitomo Trust & Banking.
Finance ministers and central bankers from the Group of 20 wealthy and developing economies gather in South Korea later this week to grapple with Europe's debt crisis, financial reforms and efforts to rebalance the global economy.
The dollar edged up 0.4 percent to 91.43 yen. Traders reported some buy stops above 91.50 yen if the dollar could push through exporter sales.
The Australian dollar was steady at $0.8476 ahead of Reserve Bank of Australia's rate decision on Tuesday, with expectations the central bank to keep it on hold at 4.50 percent.
The yen crosses rebounded after falling on Friday. The Aussie gained 0.7 percent to 77.43 yen.
Market players are keeping an eye on politics in Japan after the tiny Social Democratic Party on Sunday left the ruling coalition ahead of an upper house election, although the impact on the currency market so far was limited.
Sterling was steady at $1.4485 after a British treasury minister, an architect of plans to rein in the budget deficit, resigned on Saturday following revelations about his expenses.
