The dollar traded higher against the euro on Monday, after a stronger-than-expected jobs report from the United States raised expectations that the Federal Reserve would move sooner to lift rates from a four-decade low. But the U.S. currency failed to squeeze out gains against the yen on selling by Japanese exporters and as steep gains in Tokyo share prices fueled demand for the yen from foreign investors. "Most (Japanese) exporters don't think the dollar will rise above 105 yen so they'll sell if it gets close to that level," said Mitsuo Imaizumi, deputy general manager of the international bond and forex department at Daiwa Securities SMBC As of 0301 GMT, the dollar was at 104.39/47 yen , little changed from late U.S. levels on Friday. The euro eased to $1.2106/10 versus $1.2132/38, edging closer to a four-month low of 1.2045 hit late last month. Sterling slipped to $1.8264/72 compared with 1.8302/07. Data on Friday showed that U.S. non-farm payrolls climbed 308,000 in March, the biggest gain in four years and more than twice what the market was expecting. An improvement in jobs data is seen key to the Fed raising its funds rate from a 1958 low of one percent, which would increase the allure of dollar-denominated assets for foreign investors. "The euro is reacting to (strong U.S.) fundamentals. I think there is a chance that we could see the euro fall under 1.2," said Imaizumi.
Against the yen, the single currency was also trading lower at 126.34/46 yen compared with 126.60/74 in late U.S. trade. "What we may see is that the yen will continue to outperform the euro, because there has been a fairly large euro rally to date and we haven't seen that in the yen due to intervention," said Naomi Fink, senior currency strategist at BNP Paribas. "And secondly because we see some pretty strong economic figures and improvements in sentiment in Japan, whereas we don't really in the euro area." Hans-Werner Sinn, head of Germany's Ifo Institute, said on Sunday that the euro zone's biggest economy was mired in an economic crisis, with high wages, foreign competition and a political logjam making him doubtful of near-term improvements. Meanwhile, Japan's closely watched Tankan survey of business sentiment, released last week, showed that Japanese companies felt business was better in March than at any time in almost seven years. Many analysts say that given improving economic fundamentals, large foreign buying of Japanese stocks, and the Japanese authorities apparent scaling back of currency intervention, the yen is likely to make further gains. The dollar is still not far from the four-year low of 103.40 yen hit on Wednesday. "I don't think the market is suddenly going to push the dollar yen below 100 today, but it's probably only a matter of time," said BNP's Fink. The Nikkei average <.N225> ended the morning session up 1.45 percent at 11,986.82, after rising as high as 11,997.91 -- just off a key psychological level of 12,000 . The market will be looking to comments from Japan Finance Minister Sadakazu Tanigaki, due to appear in parliament after 0400 GMT, and Vice Finance Minister Masakazu Hayashi, who will hold a regular news conference at 0800 GMT.///www.reutres.com