The dollar has rebounded strongly against the euro and yen amid optimism about U.S. economic growth.

The euro has dropped below its one-to-one parity with the dollar to hit its lowest level since its Jan. 4, 1999, market launch.

The single European currency settled at 96.99 cents in New York trading Monday.

The dollar has also gained ground against the yen and recovered the 107 yen level it lost in mid-October amid expectations of higher U.S. interest rates.

The U.S. Federal Reserve is widely expected to raise its target for the federal funds rate at its policy-setting meeting this week in a move aimed at curbing inflationary pressures.

Also weighing on the yen is a statement at last month's Tokyo meeting of financial leaders from the Group of Seven industrial nations in which they shared Tokyo's concern about a strong yen.

Japan declared to maintain a zero-interest-rate policy to keep the yen from rising against the dollar.

The widening interest rate differentials between the U.S. and Japan are working in the dollar's favor.

Japanese institutional investors are buying back dollars to rebuild their dollar-based portfolios.

U.S. hedge funds have also activated carry trades where they borrow yen at low interest rates and convert them to dollars to invest in high-yield U.S. Treasuries.

Fears of dollar-buying intervention by the Bank of Japan are also keeping the dollar from falling.

I expect the unit may test the next resistance level of 108 yen.

If the dollar breaks this level, it may go to 110 yen.

But for this month, I see the dollar trading between 105 yen and 110 yen.