NEW YORK, United States?The US dollar fell against most key currencies Monday as investors locked in profits following the greenback's strong gains last week.

The euro changed hands at $1.2822 in New York around 2100 GMT, higher than the $1.2750 fetched late Friday.

The dollar retreated against the Japanese currency, at 85.34 yen from 86.28.

"The dollar weakened during a quiet session as investors likely squared some positions following recent price action," said UBS analyst Brian Kim.

"We stay bullish on the dollar and keep our year-end 1.1500 (dollars against the euro) forecast as investors refocus on the eurozone recovery and persisting structural issues there," Kim said.

Dollar sentiment was affected by reports about central banks diversifying out of the greenback, analysts said.

Bloomberg reported early Monday that China had bought "quite a lot" of European bonds, quoting a former adviser to the People's Bank of China who was part of a foreign-policy advisory committee that visited France, Spain and Germany recently.

"Concern about central banks diversifying out of US dollars is the main reason why the greenback was sold," said analyst Kathy Lien of Global Forex Trading.

However, she said, the dollar selloff was "extremely modest, implying that investors remain nervous and are simply waiting for another good reason to bail out of risky currencies."

The dollar, regarded as a safe haven in times of financial turmoil, was in a big demand last week amid fears that the global economic recovery could stall, following the release of weak US, Chinese, and Japanese economic data.

Against other key currencies, the dollar slipped to 1.0392 Swiss francs from 1.0514 on Friday while the British pound rose to $1.5658 from $1.5590.