The euro headed up toward last week's seven-week high on the dollar as the greenback beat a general retreat before US data later in the day on nervousness over what the numbers would signal for US rate hikes.
As most European traders returned to work after a holiday weekend, attention turned to US manufacturing activity data due out this afternoon, with investors waiting to see whether this would indicate enough economic strength to warrant a June rate rise.
The weekend attack in Saudi Arabia, which left 22 people dead, remained a factor as oil prices climbed back above $40 a barrel. The market is nervous rising oil prices could stunt US economic growth and set back rate rises.
By 9 a.m. EDT the euro had gained 0.3 per cent on the day to $1.2220, within a cent of Friday's seven-week high.
Manufacturing in the euro zone put on its strongest performance in more than three-and-half years as a weaker euro boosted exports and consumer demand improved in France.
The PMI index gained to 54.7 in May from 54.0 in April and the euro inched up in its wake.
The dollar eased slightly to 109.36 yen having slid to its lowest since early May on Monday, just above 109.00 yen, as Tokyo traders drove it lower.
The greenback was also soft on the day against the Swiss franc, sterling and the Norwegian crown.