The dollar edged up on Tuesday, but mostly took a breather as investors waited to see if US employment data later this week would reinforce US Federal Reserve officials' recent hawkish messages. The dollar index, which tracks the greenback against a basket of six major rivals, added 0.2 percent to 95.714, though it remained shy of the previous session's high of 95.834 which was its highest since August 12.
It traded well above Friday's session low of 94.246 plumbed before Federal Reserve Chair Janet Yellen's upbeat comments on the US economy and Fed Vice Chair Stanley Fischer's remarks that interest rate hikes were possible this year. The US employment report on Friday is expected to show an increase of 180,000 jobs in August, according to the median estimate of 89 economists polled by Reuters, below the better-than-expected 255,000 additions in July and 292,000 gains in June.
"It's hard to move until we see the jobs figures, after Fischer stressed that the August report would be a key factor, and that an interest rate hike could follow good numbers," said Kumiko Ishikawa, senior FX analyst at Gaitame.Com Research Institute in Tokyo.
US economic data on Monday showed consumer spending increased for a fourth straight month, pointing to a pickup in growth that could pave the way for the Fed to raise interest rates later this year. The euro inched 0.1 percent higher to 114.11 yen and was down 0.1 percent against the dollar at $1.1172. The dollar added 0.2 percent to 102.14 yen, moving back toward Monday's high of 102.39. The yen has broken above 99 against the dollar several times this month, which has made Japanese officials wary of speculative moves.
Japanese Chief Cabinet Secretary Yoshihide Suga told Reuters in an interview on Tuesday that the government is watching market moves carefully and is ready to respond "appropriately", when asked whether Tokyo could intervene in the currency market to stem excessive yen rises.
Currency speculators reduced their bets on the dollar for a fourth straight week through August 23, trimming their net dollar-long positions to their lowest since early July, and raising their net long positions on the yen. "The market is very reactionary, but even though there is an extreme position story, there's not an extreme adjustment of that extreme," said Bart Wakabayashi, head of Hong Kong FX sales at State Street Global Markets.
"There's not a lot of conviction behind the moves that we're seeing," he said."It's probably just an adjustment of yen long positions." Underpinning the yen, data released early in the session showed Japanese household spending fell less than expected last month and the jobless rate hit a two-decade low. But with the economy barely growing and inflation sliding further away from the Bank of Japan's 2 percent target, most economists polled by Reuters expect the bank to ease further next month when it conducts a comprehensive review of the effects of its stimulus programme.
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