By MarketWatch TOKYO (MarketWatch) -- The dollar gained on the euro and British pound in Asian trading Monday, although it held steady against its Japanese counterpart on waning U.S. rate-hike expectations. Trading was thin Monday, as U.S. markets are closed for a national holiday. On Monday, Bank of America-Merrill Lynch analysts cut their U.S. dollar/yen forecast, and now expect the U.S. unit to buy ¥89 at the end of the third quarter of this year, down from their previous forecast of ¥94. They also expect the dollar to trade at ¥90 at the end of the fourth quarter, down from ¥97, and at ¥91 at the end of the first quarter of 2011, down from ¥100. "As subdued U.S. rate-hike expectations will limit the upside for U.S. market yields, USD-JPY [U.S. dollar-Japanese yen], which is highly sensitive to U.S.-Japan yield differentials, is not likely to enter a steady upward trend in the next few quarters," they said. Against the yen, the dollar (CUR_USDYEN 87.8400, +0.1400, +0.1596%) bought ¥87.80, just a tick short of ¥87.81 in late North American trading on Friday. The dollar index (DXY 84.55, +0.12, +0.15%) , a measure of the greenback against a basket of six major currencies, was at 84.560, compared with 84.41 late Friday. The euro (CUR_EURUSD 1.2526, -0.0030, -0.2389%) slipped to $1.2533, from $1.2553, and the British pound (CUR_GBPUSD 1.5169, -0.0028, -0.1843%) fell to $1.5167 from $1.5193 late Friday. On Friday, the dollar extended its week's decline, heading into the holiday weekend down for the fourth straight week. See Friday's Currencies report.

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