By Fabio Alves Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--The dollar extended overnight losses against its major rivals in Monday morning trading as a rally in oil, gold and metal prices prompted investors to snap up riskier assets. "There's a risk rally across the board," said Jacob Oubina, a currency strategist at Forex.com in Bedminster, N.J. Demand for risk picked up steam as the New York trading got underway, with the greenback hitting intraday lows against major rivals. Currencies from countries rich in commodities, such as Canada and Australia, are leading the gains, with the dollar below the key C$1.04 level. The euro surged past $1.44, while the greenback retreated from a four-month high against the yen to trade below Y93. Investors are eyeing the 10:00 a.m. EST release of December ISM manufacturing data in the U.S. to see whether the dollar will pare its losses, resuming a trading pattern seen in December, Oubina said. Stronger U.S. economic data fueled a rally in the greenback last month on bets the Federal Reserve will lift interest rates sooner rather than later. Monday morning in New York, the euro was at $1.4420 from $1.4324 late Thursday, according to EBS via CQG. The dollar was at Y92.64 from Y93.10, while the euro was at Y133.59 from Y133.35. The U.K. pound was at $1.6161 from $1.6150. The dollar was at CHF1.0312 from CHF1.0365. The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 77.442 from 77.908. Signs of a pick up in manufacturing activity in China, India and Europe sent oil above $81 a barrel overnight, while silver and copper jumped more than 2%. European equities are higher, led by energy and mining stocks. Futures on the Standard & Poor's 500 Index also indicate a stronger opening for U.S. stocks. "A big increase in oil prices is supporting the commodities currencies," said Kasper Kirkegaard, a currency analyst at Danske Bank in Copenhagen. "We're seeing an improvement in risk appetite as liquidity slowly comes back to the markets." As investors return to the market after the year-end holiday break, they're more willing to add higher-risk currencies back to their holdings after paring their bets against the dollar last month, traders said. "We saw in December short dollar positions were being closed down, and now with economic data still supportive for risky assets, we expect to see [riskier] positions being taken back on," Kirkegaard said. The first trading day of 2010 in major currency markets began with a slew of positive economic data supporting the view of a stronger global recovery. The HSBC China Manufacturing Purchasing Managers Index, a gauge of nationwide manufacturing activity, rose to 56.1 in December from 55.7 in November, HSBC Holdings PLC said Monday. December was the ninth consecutive month the PMI has been above 50.0. In Europe, the euro-zone's manufacturing sector purchasing managers' index rose to a 21-month high in December. According to Markit Economics, the euro-zone's factory sector PMI rose to 51.6 from 51.2 in November. "A strong reading on the China PMI...has likely encouraged anticipation of rebuilding of positions in global growth-levered currencies after exposure was cut back into year-end," Credit Suisse Group strategists wrote in a note to clients Monday. Meanwhile in the U.S., the Institute for Supply Management's December index is expected to show an increase to 54 from 53.6, according to economists polled by Dow Jones Newswires. "If we see a positive surprise in the ISM, that would probably be dollar supportive," said Danske Bank's Kirkegaard. "We've seen a shift in the way the dollar reacts to U.S. economic numbers, so we can see the intraday depreciation of the dollar slowdown if there's a good number, but not enough to completely turn sentiment around today." Canada Morning The Canadian dollar surged amid a rally in oil and metal prices. The dollar was at C$1.0393 in Monday morning trading from 1.0499 late Thursday. "The rally in gold and oil are driving the currencies in Canada and Australia," said Forex.com's Oubina. "They're both commodities exporters and so any rally in the commodities space, you're going to see a positive reaction from Canada and Australia." -By Fabio Alves, Dow Jones Newswires; 212-416-2204; fabio.alves@dowjones.com

Source