The dollar recovered slightly against the yen on Monday, after suffering a setback late last week when subdued US wage growth clouded the outlook over when US interest rates were likely to rise.
The dollar edged up 0.1 per cent to 124.02 yen, steadying from Friday’s low near 123.50 yen, and still near the seven-week high of 124.58 yen set last week.
The dollar was sold on Friday after the US Employment Cost Index rose a mere 0.2 per cent in the second quarter, the smallest gain in three decades.
Against a basket of six major currencies, the dollar last traded at 97.263, staying below a one-week high of 97.773 set last Thursday.
Some analysts said the dollar could draw strength from US economic indicators this week, including the Institute for Supply Management’s report on US factory activity due on Monday and non-farm payrolls data on Friday.
“There will probably be some dollar-buying even ahead of the US jobs data, if we get good numbers before then,’’ said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.
The dollar could rise to levels near its 13-year high of 125.86 yen set in early June, if the US economic data due this week come in strong, Murata said.
If data out on Wednesday shows the US trade deficit widening it could throw a dampener on dollar buying, he said.
The euro held steady at $1.0981, having backed off from Friday’s intraday high of around $1.1114.
The dollar’s selloff on Friday could have been far worse if not for hawkish comments from St. Louis Federal Reserve President James Bullard.
Bullard, who has long called for an earlier tightening, was quoted in a Wall Street Journal report as saying the latest US economic growth data boosts the case for the central bank to raise rates in September.
His comments helped the dollar pare losses late into the US session on Friday. Yet US Treasury yields still hovered near troughs hit on Friday, suggesting some doubts remained about the timing of a Fed hike.
“Overall, we continue to see the US dollar staying firm and strong,’’ said Heng Koon How, senior FX strategist for Credit Suisse private banking and wealth management in Singapore.
The yen, however, could withstand the broader strength in the dollar, Heng said, if the Bank of Japan refrains from expanding its monetary stimulus. The yen looks significantly undervalued versus the dollar, he said.
“We see few reasons for it (the yen) to weaken further,’’ Heng said.
The Australian dollar held steady at $0.7301, having recovered from a six-year low of $0.7234 plumbed on Friday.
Further gains for the Aussie are likely to be limited though after an official survey showed growth at China’s big manufacturing companies unexpectedly stalled in July as demand at home and abroad weakened.
The Aussie is often used as a liquid proxy for China plays.