The dollar hovered near a 3-1/2-year high against the yen and held an upper hand against other major currencies on Monday after remarkable growth in US employment added to optimism over recovery in the world's largest economy. US employers added more-than-expected 236,000 workers to their payrolls in February while the jobless rate fell to a four-year low of 7.7 percent.
The jobs report signalled the economy may have developed enough momentum to withstand the blow from higher taxes and deep government spending cuts, fuelling speculation that the US Federal Reserve will tone down its ultra-loose monetary policy sooner than anticipated. "If we see another job growth of more than 200,000 in the next payroll survey, the market will surely get more excited with talk of an exit from QE," said a trader at a US bank.
The dollar edged up 0.15 percent in Asia to 96.12 yen, not far from Friday's high of 96.60 yen, which was its highest level since August 12, 2009. The Fed is currently buying $85 billion a month in bonds to push down long-term borrowing costs and spur economic growth. It has said it will keep buying assets until the outlook for the jobs market has improved substantially. While investors think the Fed's next policy step is to scale back its stimulus, they expect the world's other major central banks to ease policy further.
The Bank of Japan is perceived to be seeking a "new dimension" of easing under new governor Haruhiko Kuroda, who is expected to be appointed this month. Many market players expect the BoJ to take fresh easing steps at Kuroda's first policy meeting on April 3-4. The dollar's index against a basket of six major currencies stood at 82.722, flat on the day and near a seven-month high of 82.924 hit on Friday.
Having risen 4.8 percent since a low hit in early February, the index is seen as on course to test its July 2012 peak of 84.10. As the dollar firms broadly, the euro was a tad weaker at $1.2995, about 0.1 percent below late US levels after having hit a three-month low of $1.2955 on Friday.
The British pound was just a hair above 32-months low hit on Friday, fetching $1.4918, versus Friday's low of $1.4886. The Australian dollar slipped following data published on Saturday showed uneven an recovery in China. Both industrial output and retail sales fell short of market expectations, leaving fixed asset investment as the key driver of economic growth. The Aussie shed 0.1 percent to fetch $1.0223, edging towards an eight-month low of $1.0116 hit a week ago.