The dollar edged up on the yen in quiet trade on Monday, with many Asian and European financial centres closed for the Easter holiday and as markets waited for the U.S. corporate earnings season to get into full swing.
U.S. banks including Goldman Sachs, JPMorgan and Citigroup are set to report first-quarter results this week, and traders are keen to see how stock markets react to these earnings reports.
But after a relaxation of industry accounting standards, analysts say it will be difficult to gauge losses from bad loans in areas like real estate and consumer credit.
"Market participants generally stayed on the sidelines before the U.S. bank earnings and they are waiting for stocks' moves following the results," said a dealer at a Japanese bank.
Last week, the dollar rose against the yen, buoyed by a rally in U.S. shares after positive earnings guidance from U.S. bank Wells Fargo.
"If U.S. earnings results show signs that the U.S. is pulling away from the worst of the economic downturn, risk appetite is expected to grow, putting pressure on the yen," said Yoshihisa Kanzaki, a currency dealer at Shinkin Central Bank.
Others said the currency market has priced in positive U.S. earnings figures, so downward pressure on the yen could be limited even if the results are better than expected, and the market is more likely to swayed by negative surprises.
The dollar was trading around 100.42 yen compared with 100.22 yen in late Tokyo trading on Friday. The U.S. currency touched 101.45 yen last week, its highest in six months.
The euro was quoted at $1.3168, a shade down from $1.3186 on Friday when it also slipped to $1.3090, a level not seen since mid-March.
Against the yen, the euro was flat at 132.26 yen. It climbed to 137.42 yen last week, its highest in six months.
LIFE INSURER
Meiji Yasuda Life Insurance Co, one of Japan's top nine life insurers which hold a total of about $1.5 trillion in assets, said it planned to increase currency-hedged foreign bond holdings by more than 200 billion yen ($2 billion) this financial year to next March and cut foreign stock holdings by 40 billion yen.
The Australian dollar rose against both the dollar and yen even though Australia's markets were closed and traders in Tokyo said business was limited.
The Aussie was up 0.5 percent at $0.7224 and rose above 73.00 yen, the highest since October, before falling back to 72.51 yen.
Retail investors had likely picked up the higher yielding Aussie on expectations Japanese stocks would open higher, giving a lift to investor confidence, dealers said, but the Nikkei average later fell.
The Aussie has gained 2 percent against the dollar this year and 13 percent against the yen as investor confidence has crept back into the market and players have begun to look for yield.
Australia last week cut its key cash rate by 0.25 basis points to 3.0 percent, less than some had expected but still higher than rates near zero in both Japan and the United States.
Market players were also looking to developments in China after a report the country was considering more stimulus steps.
China is planning a new economic stimulus package targeted at boosting consumption, the China Securities Journal reported, citing an official of the State Information Center, which is affiliated with the country's top planning agency.
If China expands its economic measures, it would help increase investor risk tolerance as a strong economic recovery in China would help the global economy, traders said.
The U.S. Treasury Department is directing General Motors to lay the groundwork for a bankruptcy filing by June 1, even though the automaker has publicly stated it could reorganise outside of court, the New York Times reported.
The immediate impact of the GM report on the currency market was limited but players will watch how U.S. markets react to it later in the session, dealers said.
The market will also be watching U.S. economic data, including housing and labour market figures, as well as Chinese gross domestic product data for the first quarter due this week.
