German business morale rose more than expected in December as the outlook for Europe’s largest economy improved despite the energy crisis and high inflation, a survey showed on Monday

The dollar edged down against the euro as upbeat German business morale data supported the common currency, while a modest improvement in investors’ appetite for riskier currencies weighed on the safe-haven dollar.

German business morale rose more than expected in December as the outlook for Europe’s largest economy improved despite the energy crisis and high inflation, a survey showed on Monday.

The euro rose 0.23% to $1.0606, not far from the six-month high of $1.0737 touched last week.

I think the dollar is generally softer on slightly higher risk-on trading, said John Doyle, vice president of dealing and trading at Monex USA.

The U.S. currency, which rallied for much of this year on a hawkish Federal Reserve and rising geo-political tensions, has come under pressure in recent weeks as investors bet the central bank may have limited room to keep on with its inflation-fighting interest rate hikes.

Last week, Chair Jerome Powell said the Fed will deliver more interest rate increases next year despite a possible U.S. recession, with rates expected to peak above 5%.

European Central Bank vice-president Luis de Guindos said on Monday it would keep raising euro zone rates to curb inflation and was not considering revising its own mid-term inflation goal of 2%.

The Australian dollar, viewed as a liquid proxy for risk appetite, was 0.19% higher after President Xi Jinping and his senior officials pledged to shore up China’s battered economy next year in the face of the worsening spread of Covid-19 in the capital Beijing.

Aussie is getting a bit of a lift on the Chinese news, said Doyle.

(The move) might be a bit of a relief rally after getting stomped at the end of last week, he said.

The dollar was 0.16% higher against the Japanese yen after falling as much as 0.7% in the session on a report Japan is considering revising a key monetary policy after a new Bank of Japan governor is appointed in April.