Yen gains

The yen gained broadly on Monday as investors nervous about the global economic outlook shunned risk and took shelter in currencies perceived to be safest in times of subpar growth. The dollar hit a five-week low against the yen as fallout from last week's grim US jobs data unnerved investors who had bet on an improving world economy.
The greenback briefly hit a two-week high against the euro but gave up gains as the Dow and S&P 500 staged a late return to positive territory. When risk aversion rises, investors cut holdings of stocks and higher-yielding currencies and often buy back yen and US dollars that were used to finance the trades.
The dollar was down 0.8 percent at 95.30 yen after hitting a five-week low of 94.66 yen. The euro hit two-week lows against the dollar and yen. It was last down 0.6 percent at 133.16 yen but wiped out earlier losses to trade up 0.1 percent against the greenback at $1.3973. Sterling fell 0.4 percent to $1.6270 and 0.9 percent to 155 yen.
Data showing the US service sector shrank at a slower pace in June failed to stop the overall move away from risk, and analysts said traders were coming to terms with seeing recent economic data undershoot expectations. Just before last week's long US holiday weekend, data showed US employers cut 467,000 jobs in June, more than economists had expected, while the jobless rate rose to 9.5 percent.
Andrew Wilkinson, analyst at Greenwich, Connecticut-based Interactive Brokers Group, called it "a wake-up call for those dreaming about a global recovery and a return to business as usual." One potential hurdle for the dollar could come later this week if a G8 meeting in Italy features discussion about diminishing the dollar's role as the world reserve currency.
Though any diversification of central bank reserves away from the dollar would take many years to materialise, investors are on alert after several Chinese officials said the world should look to displace the US currency.
The dollar received some support, however, when China's vice foreign minister said over the weekend the US currency would remain dominant for "many years to come." China is the world's biggest holder of US Treasury debt and has some $1.95 trillion in foreign exchange reserves, with some 70 percent or so thought to be held in dollars.