* Dollar holds Friday gains, euro under pressure
* Strong China data fails to shift risk averse mood
* Canadian dollar slips on risks to oil pipeline
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
By Tom Westbrook
SINGAPORE, Jan 18 (Reuters) - The dollar clung to gains on Monday and the Japanese yen edged higher as softening U.S. economic data and rising global coronavirus cases kept investors cautious, while lockdowns and Italian political turmoil held the euro under pressure.
The euro EUR= dipped to a six-week low of $1.2066 in Asia and fell to a one-month low of 125.20 yen EURJPY=R . The yen JPY= was last up about 0.2% at 103.70 per dollar and it also rose on the risk-sensitive Australian and New Zealand dollars.
Better-than-expected Chinese economic data headed off further selling, but was not enough to shift currency traders' mood. safety bid has added another layer of support for the dollar since the Democrats won control of U.S. Congress a fortnight ago, which triggered a surge in yields as investors priced in bigger stimulus from a borrow-and-spend Biden administration.
The mood soured after Friday data showed U.S. retail sales fell for a third straight month in December, stoking worries that the recovery is running into trouble as health authorities warned that the worst of the latest COVID-19 wave might be yet to come. is also facing surging cases and an Italian government that must survive crucial votes in parliament on Monday and Tuesday in order to cling to power. dollar index steadied after touching a one-month high and last traded at 90.827. Sterling GBP= on Monday sat near at a one-week low of $1.3567.
Nevertheless, many investors appear to be sticking in crowded dollar shorts, which hit an almost 10-year high last week, even though the bounce has carried the dollar index about 1.9% higher and pushed the euro more than 2% lower in two weeks.
"The market is in a bit of a wait and see mode debating about the dollar, in terms of whether higher U.S. yields could provide support or whether we see further decline," said Bank of Singapore currency analyst Moh Siong Sim.
"I think the balance of risks is still in favour of a reflationary environment, and therefore risk sentiment should stay positive and we should see a further dollar decline."
Elsewhere, the Canadian dollar CAD=D3 slipped 0.2% after reports that Joe Biden plans to soon rescind permission for the Keystone XL pipeline, a project which would link oil sands in Alberta to refineries in Texas. in the week, President-elect Biden is due to be inaugurated in a heavily-guarded Washington. Tensions are high after mob violence a few weeks ago.
Biden's pick for Treasury Secretary, Janet Yellen, is expected to rule out seeking a weaker dollar when testifying on Capital Hill on Tuesday, the Wall Street Journal reported. World FX rates
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