The dollar bounced off a 10-day low against the yen on Monday, scooped up on the dip by Japan importers after it found support on the charts, although doubts lingered about the greenback's strength after a rally in the U.S. bond yields took a breather.
The dollar muscled in on the Japanese currency, pushing it lower against other units such as the euro and the Australian dollar, while commodity currencies were broadly steady after a hammering last week on worries of slowing demand for resources.
"Even though the dollar rally on the yen has lost a bit of momentum, the dollar is still strong after it didn't break below 81.97 support twice in the last two weeks," said Teppei Ino, currency strategist at Bank of Tokyo-Mitsubishi UFJ in Tokyo.
Ino added that many exporters have already finished their currency hedging, not only for the fiscal year to March 31, but also until the end of the first quarter of the next financial term.
The dollar climbed 0.5% to 82.70 yen, inching closer to an 11-month high of 84.19 set on March 15. Strong support is seen at the 38.2% retracement of its Feb-March rise at 81.06.
The yen also fell against the euro, shedding 0.7% to 109.61 and versus the Australian dollar, losing 0.2% to 86.45.
Weak data from China and Europe last week reminded investors of the fragile nature of the economic recovery, stopping the selloff in safe-haven U.S. Treasuries and weighing on the greenback as short-term U.S. bond yields leveled out.
That saw the dollar index, a gauge of its performance against a basket of major currencies, sink to a two-week low last week, before it recovered a little bit of ground on Monday to 79.42.
FACING A BARRAGE
The euro hovered a whisker away from a three-week high against the dollar, last fetching $1.3254, close to Friday's peak of $1.3294.
It failed last week to breach resistance at $1.3302, a level representing a 61.8% retracement of its late February to mid-March fall.
Investors shied away from chasing last week's rally as the single currency faces a barrage of events this week, including key economic data from Germany, bond auctions in Italy and a meeting of euro zone finance ministers.
Italy is looking to raise up to 7.5 billion euros in debt markets amid renewed pressure on peripheral euro zone debt sparked by fears of fiscal slippage.
"Any sign of erosion in restored confidence for these bonds is likely to weigh on the euro," Barclays Capital analysts wrote in a client note.
"We continue to expect EUR/USD to fall gradually to $1.20 in 12 months on the back of easier monetary conditions in the euro area and as the risk-premium will likely remain elevated."
The Aussie which suffered a steep fall last week, at one point popped up to $1.0493, from $1.0475 late in New York on Friday, with traders noting good buying interest from a Swiss bank. It was last down 0.1% at $1.0450.
