Investing.com - The euro was slightly higher against the dollar on Monday after data showed that activity in the euro zone manufacturing sector slowed to a near standstill last month.

EUR/USD was up 0.13% to 1.2468, off overnight lows of 1.2418.

Data on Monday showed that the euro zone’s manufacturing purchasing managers’ index slowed to 50.1 from a preliminary reading of 50.4 last month, just barely above the 50 level separating growth from contraction.

Germany’s manufacturing PMI entered contraction territory for the first time in 17 months, falling to 49.5, as new orders fell at the fastest rate in nearly two years.

The French manufacturing PMI remained in contraction territory at 48.4, while Italy’s factory PMI came in at 49.0.

The reports came after data on Friday showed that the annual rate of euro area inflation slowed to a five year low of 0.3% in November, down from 0.4% in October.

The weak data added to pressure on the European Central Bank to step up measures to spur growth and stave off the threat of deflation ahead of its upcoming policy meeting on Thursday.

The single currency was steady against the yen, with EUR/JPY at 147.74, recovering from overnight lows of 147.11.

Elsewhere, the yen fell to fresh seven year lows against the dollar, with USD/JPY hitting highs of 119.14. The drop in the yen came after ratings agency Moody’s downgraded Japan's sovereign debt rating by one notch to A1 on Monday.

"Fiscal consolidation will become increasingly difficult to achieve as time passes given rising government spending, particularly for social programs associated with a rapidly ageing population," the rating agency said.