The dollar hit a new two-year high against the yen in early Asian trade on Monday on the prospect of further US interest rate rises but later retreated below the 118 mark as exporters turned sellers, dealers said. The US currency traded close to an 18-month peak against the euro, which fell heavily late last week as the market overlooked a somewhat disappointing US payrolls report. The dollar rose to as high as 118.40 yen in Tokyo morning trade --- levels last seen in August 2003 -- after topping 118 in New York late Friday. However, by afternoon here it had eased back to 117.87 yen, compared with 118.29 in New York late Friday. The euro was little changed at 1.1813 dollars against 1.1811 in New York and slipped to 139.29 yen in Tokyo from 139.78. "The dollar's positive trend based on interest rate differentials has not changed," said Mitsuru Sahara, vice president at foreign exchange division at UFJ Bank. Dealers expect the US Federal Reserve to continue raising interest rates, which now stand at a four-year high of 4.0 percent after 12 successive hikes to reverse a string of cuts seen after a 2001 recession, he said. The US currency extended gains late last week despite a somewhat soft US employment report for October. The data showed the US jobless rate dipped unexpectedly to 5.0 percent last from 5.1 percent in September but the number of new jobs created was well short of the 100,000 expected at just 56,000. "The market took the view that the US employment report was not disappointing considering the current environment, including higher oil prices," said Sahara. But Kikuko Takeda, currency analyst at Bank of Tokyo-Mitsubishi, took a slightly dimmer view of the US employment data. "When you look closely at the new employment figures, the report shows employment was weak not only in hurricane-ridden regions but in other regions as well," Takeda said.