SINGAPORE, June 30 - The dollar inched towards a two-month peak against the yen on Monday and stocks and bonds eased as investors prepared for a new quarter that many hope will bring stronger signs of a U.S. economic recovery. The dollar has taken on a firmer tone since the Federal Reserve trimmed U.S. interest rates on Wednesday, but stock traders have been uncertain whether the cut would be enough to revive the economy. Japanese government bond (JGB) prices fell sharply, reflecting recent fragility in global bond markets and firmness in equities, traders said. On the last day of the second quarter, some investors were betting those trends would continue in the coming months. "A possible summer rally in U.S. stocks and good data should push up the dollar," said Kenji Kobayashi, manager of the foreign exchange and treasury division at Bank of Tokyo-Mitsubishi. At around 0230 GMT, the dollar was worth 119.85 yen compared with 119.59 in late U.S. trade on Friday. It hit a two-month high of 120.04 yen on Friday. The euro was flat at $1.1433 after falling at one point on Friday to a six-week trough of $1.1399. Japanese stocks ended the morning session steady, with the Nikkei average <.N225> easing less than two points to 9,102.33. Other markets were a touch weaker, losing a quarter of a percent in Australia <.AXJO>, 0.5 percent in Hong Kong <.HSI> and one percent in South Korea <.KS11>.
The softer tone followed declines on Wall Street on Friday, where shares booked their first losing week in five after disappointing earnings reports. As JGB prices fell, the yield on the key 10-year bond <0#JPTSY=JBTC> matched a near four-month high of 0.785 percent. The yield has risen about 83 percent from a record low of 0.43 percent seen on June 11. "The market is now watching whether the rise in the 10-year yield will be limited at around 0.8 percent," said Kunihiro Ishibashi, a director at Mizuho Investors Securities. "JGBs had been overbought in the first place, and now the market is still in a phase of consolidation backed by firmness in the equity market, but we have to remember that deflation in Japan is still there." U.S. oil futures were steady, maintaining gains posted in New York as a looming strike in Nigeria, the world's eighth-largest oil exporter, raised worries over supplies.
Front-month August crude was at $29.26 per barrel, down one cent after settling up 26 cents on Friday. Gold was little changed at $345 an ounce.//