LONDON (March 6): The US dollar slipped in European trading on Monday, as investors took profits after the currency's boost last week on the expectation that the US Federal Reserve will hike interest rates this month.

News earlier in the day of North Korea firing four ballistic missiles, three of which landed in Japanese waters, also pressured the greenback as investors bought into the perceived safe-haven yen.

Fed Chair Janet Yellen on Friday said the US central bank was set to lift its benchmark interest rate this month, provided jobs and inflation data hold up, which markets saw as cementing a hike at the bank's next meeting.

The comments, on the back of a string of hawkish commentary by Federal Reserve officials, saw the US dollar slip on Friday as investors took profits from its fourth straight weekly gain against a basket of major currencies, and it slipped another 0.3% on Monday to a one-week low of 101.22.

"It's a continuation of the price action we had on Friday in the wake of Yellen's speech," said Credit Agricole currency strategist Valentin Marinov in London, adding that he saw a positive outlook for the dollar over the long term.

"There is some concern in the market that the hike won't be accompanied by more hawkish forward guidance (that would suggest) the Fed would hike three or even four times this year."

Fed funds futures pricing shows traders see around an 80% chance of a rate increase this month, up from just a one-in-three chance early last week, according to CME Group's Fed Watch tool.

Still, speculators reduced bullish bets on the US dollar in the week ending Feb 28, pushing net longs to their lowest since early October, according to Commodity Futures Trading Commission data released on Friday and calculations by Reuters.

As risk appetite fell on the news from North Korea, the greenback dipped 0.4% against the yen to 113.68, down from Friday's high of 114.75.

"North Korea is unpredictable, but it fairly frequently conducts missile tests," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.

"One difference now is that it is also hard to predict how President (Donald) Trump will respond to such tests," he said.

US political developments also weighed on the US dollar. Trump on Saturday accused his predecessor Barack Obama of wiretapping him during the 2016 election campaign, an accusation rejected by Obama and a top former intelligence official.

The euro rose to a two-week high of US$1.0640, as investors continued to monitor France's presidential race.

Scandal-hit conservative candidate Francois Fillon said on Sunday he was staying in the race but left the door open to talks with senior members of his party who are increasingly anxious about his bid.

Latest polls show Alain Juppe, who is more centrist than Fillon, would reach the second round should he replace him as the Republicans candidate.