LONDON (MarketWatch) - The U.S. dollar gave up early gains on the first full trading day of the new year Monday, moving lower versus most major rivals after purchasing managers in China and Great Britain reported stronger-than-expected manufacturing activity. Strategists said the data helped renew risk appetite, putting pressure on the U.S. dollar and other low-yielding assets. But they warned that a strong run of U.S. data this week, including a closely-watched gauge of manufacturing activity set for release later Monday, could end up benefiting the U.S. currency. "Having gained significantly across the board over the past month the greenback may be due for a pause at the start of this week as risk flows return to the market, but if the data continues to prove supportive, dollar weakness will not last as the unit will start trading on growth expectations rather than yield," said Boris Schlossberg, director of currency research at GFT. The dollar index (DXY 77.54, -0.32, -0.42%) , a measure of the greenback against a trade-weighted basket of rivals, traded at 77.502 in recent trade, down from 77.867 in North American trade late Thursday. Markets were closed Friday for the New Year's Day holiday. The dollar hit a four-month high versus the Japanese currency at 93.19 yen in earlier action, according to FactSet, before turning back to trade at 92.84 yen, down from 93.09 yen late Thursday. The euro bought $1.4398, up from $1.4331 Thursday, and the British pound bought $1.6217, up from $1.6178. China's manufacturing activity accelerated in December at its fastest pace in several years, according to data compiled by two competing industrial surveys. Read more on Chinese manufacturing PMI data. "Stronger-than-expected Chinese manufacturing PMI data for December are probably risk positive and will probably keep the [yen] soft against major currencies," said Tomoko Fujii, a rates and currency strategist at Bank of America Securities-Merrill Lynch Japan, in e-mailed comments. In Britain, the CIPS/Markit purchasing mangers index for manufacturers jumped to 54.1 in December from 51.8 in November, marking the highest reading since November 2007. Read more about the British manufacturing PMI rise. "The release was welcome news for cable bulls, providing the first clear piece of evidence that Q4 growth in U.K. should finally turn positive," Schlossberg said. "Cable" is a term used by currency traders to refer to the British pound/U.S. dollar cross. Earlier, Markit Economics reported that the purchasing managers index for the euro-zone manufacturing sector rose to a 21-month high of 51.6 in December from a reading of 51.2 in November, matching a preliminary estimate released last month. The big event for Monday, however, may be the 10 a.m. Eastern release of the Institute of Supply Management's monthly U.S. manufacturing index, which is forecast to show a December rise to 54% from a reading of 53.6% in November. The main event for the week, however, is Friday's report on U.S. non-farm payrolls and other labor data for December. Economists surveyed by MarketWatch predict nonfarm payrolls will rise by 10,000 in December, ending a 23-month streak of declines -- though some firms still forecast a drop. Read Economic Preview. "I don't think the market will want to be too short dollars going into ISM and non-farm payrolls," said Kenneth Broux, market economist at Lloyds TSB. While the Federal Reserve isn't likely to raise rates any time soon, a run of stronger U.S. data and expectations the central bank is set to begin unwinding its extraordinary liquidity measures should point to further support for the dollar in coming weeks. Geopolitical uncertainty is another potentially dollar-friendly factor, he said.

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