LONDON, Jan 7: The dollar gained on Monday after a sharp decline last week was sparked by fears of a recession in the United States, dealers said.

In late European trade, the euro fell to 1.4683 dollars from 1.4765 dollars in New York late on Friday.

The dollar climbed to 109.07 yen from 108.63 yen late Friday.

The dollar hit a five-week low against the euro on Friday after news that the US economy created only 18,000 jobs in December -- a four-year low.

The dismal figure has raised expectations that the US Federal Reserve will lower interest rates again when it meets at the end of the month, potentially by 50 basis points as opposed to a more cautious 25.

“The US labour market report has led the market to talk of a US recession as well as to price in the chance of a 50 basis points rate cut at the Fed’s January meeting,” said BNP Paribas analysts.

The euro, which like the dollar traded in narrow ranges on Monday, remains buoyed by the market’s belief that the European Central Bank is unlikely to follow the lead of the Fed and the Bank of England by cutting rates.

ECB policymakers are expected to hold rates steady at their meeting on Thursday, citing inflation worries.

A European Union survey showed on Monday that confidence in the European economy fell in December to the lowest level in nearly two years but not by as much as economists had expected in the eurozone.

The European Commission’s eurozone economic sentiment indicator slipped in December to 104.7 points in the single currency bloc -- the lowest level since March 2006 -- from 104.8 points from November.

But the decline was not as sharp as the 104.0 points economists had forecast, as polled by Thomson Financial News.

“December’s very small fall in the European Commission’s eurozone economic sentiment indicator provides some hope that activity in the region is slowing only moderately,” said Jennifer McKeown at Capital Economics.

Elsewhere, sterling was steady after falling to a four-and-a-half-month low against the dollar of 1.9652 dollars earlier Monday as investors turned their attention to Thursday’s interest rate decision by the Bank of England.

The verdict is expected to be a close call, with a small but growing number of analysts predicting a quarter point rate cut to 5.25 percent for the second month in a row.

“We expect sterling to face further downside towards 1.9550 usd by month end,” said Laidi at CMC Markets.

In the commodity markets, gold stood Monday at 859.25 dollars per ounce after striking a record high 868.89 dollars last Thursday. The precious metal benefits from a weak US unit as it makes the dollar-denominated commodity cheaper for buyers using stronger currencies.

In European trading on Monday, the euro changed hands at 1.4683 dollars against 1.4765 late Friday, at 160.04 yen (160.16), 0.7452 pounds (0.7470) and 1.6411 Swiss francs (1.6343).

The dollar stood at 109.07 yen (108.63) and 1.1174 Swiss francs (1.1084).—AFP