The dollar rose against the euro and the yen on Monday after last week's job data suggested the U.S. economy was not as sickly as some thought, with investors now turning to comments from Federal Reserve officials this week.
Trading was subdued before U.S. financial markets reopened later on Monday after a holiday on Friday.
U.S. June payrolls fell for the sixth month in a row, but the drop of 62,000 was in line with market expectations. Traders had feared that a bigger fall would trigger a sell-off in the dollar.
Instead, on Monday the dollar extended gains made last week against the euro after the European Central Bank (ECB) cooled speculation it might raise rates again soon.
Several Fed officials are slated to speak this week, starting with San Francisco Fed President Janet Yellen later on Monday.
Fed Chairman Ben Bernanke will speak at a Federal Deposit Insurance Corp forum on Tuesday and before the House Financial Services committee on Thursday, although his comments are expected to stick to financial market regulation.
"The main theme in the market now is whether the Fed boosts interest rates despite a weaker economy," said Hiroshi Yoshida, a currency trader at Shinkin Central Bank. "If comments from Bernanke do not support market expectations for rate tightening, the dollar is likely to slide again."
Investors are looking to see how the Fed sees the balance of risks between flagging U.S. economic growth and inflation.
Investors have started to take the view that risks to growth and concern about the financial sector will prevent the Fed from raising the fed funds rate from 2 percent for now. However, markets are still pricing in a quarter-point rise before the end of the year.
The euro fell 0.45 percent from late European trade on Friday to $1.5632, its lowest level in more than a week.
The ECB raised rates on Thursday to 4.25 percent from 4 percent, as widely expected, to bring record euro zone inflation under control, but ECB President Jean-Claude Trichet said he had "no bias" on monetary policy, dampening some expectations that the central bank would continue to raise rates.
The dollar rose 0.45 percent against the Japanese currency to 107.31 yen, its highest level in just over a week.
Talk of hefty euro zone bond redemptions this week weighed on the euro against the yen earlier in the day. Euro bond coupon payments and maturities this week total 43 billion euros compared with 15 billion euro of expected new supply.
The euro was little changed at 167.72 yen, recovering from losses as the Nikkei stock average rose nearly 1 percent.
The dollar was firm against a basket of major currencies, rising to its highest level in more than a week.
G8 STARTS
Traders are also focusing on a three-day meeting of leaders of the Group of Eight rich countries to see if they will send a message strong enough to reverse the course of record high oil prices and the dollar's long-term slide.
Climate change, along with soaring food and oil prices, are expected to dominate the agenda of the meeting, which starts in Hokkaido, northern Japan, on Monday.
"Top government officials around the world are now showing their stance of fighting surging oil and commodities prices," said Osamu Takashima, chief currency analyst at Bank of Tokyo-Mitsubishi UFJ.
"Oil and commodities might peak out soon and the euro and currencies of commodity-producing countries are likely to slide in the next six months or so," Takashima said.
The euro has tended to go up when oil rises due to speculation that oil-producing countries may use the increased dollar-denominated windfall from crude exports to buy euros and other currencies to diversify their portfolios.
U.S. President George W. Bush said on Sunday his administration supported a strong dollar policy. The market showed little reaction as such a strong-dollar mantra is sounding rather hollow in light of easing expectations of an aggressive policy tightening later this year, analysts said.
