By Frances McInnis Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--The dollar extended earlier losses against the yen Monday as investors speculated that Japanese officials are further away from intervening in currency markets than previously thought. Concerns about the pace of global growth following disappointing euro-zone data further benefited the yen, sending the traditional safe harbor to a nearly two-month high against the euro. A Bank of Japan representative said that Japanese Prime Minister Naoto Kan and BOJ Governor Masaaki Shirakawa did not discuss intervention measures during a phone conversation Monday. Kan and Shirakawa "discussed recent foreign exchange market movement as well as economic conditions at home and abroad," during a phone call Monday morning, said the representative. Monday morning, the euro was at $1.2698 from $1.2706 late Monday, according to EBS via CQG. The dollar was at Y85.20 from Y85.75, while the euro was at Y108.11 from Y108.71. The euro fell as low as Y108.09 in earlier trading, a level last reached on July 1. The U.K. pound was at $1.5535 from $1.5490. The U.S. dollar was at CHF1.0371 from CHF1.0375. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 83.024 from 82.437. Many analysts and investors viewed the dialogue as indicating a lower degree of government pressure on the BOJ than had been expected. Last week, several local media reported that the officials may meet in person as early as Monday, fueling speculation that the central bank might ease monetary policy or intervene in currency markets to combat recent yen strength, which hurts the country's export-driven economy. Despite the anti-climax of Monday's meeting, "the strong [yen] is likely to keep policy in the spotlight," said Aroop Chatterjee, foreign exchange analyst at Barclay's Capital in New York. With most attention focused on the yen, the euro's performance was also hampered by disappointing data. The euro zone's private sector expanded at a slower pace in August, weighed down by both the manufacturing and services sectors, according to a survey by financial information firm Markit. The preliminary composite purchasing managers index for the euro zone fell to 56.1 in August from July's 56.7. Economists had forecast a reading of 56.3. Both France and Germany posted better-than-expected results, while other euro-area economies dragged on the headline index, stoking investor fears that the severe fiscal tightening in smaller euro-zone countries is crimping growth. The data comes after comments on Friday by European Central Bank official Axel Weber--usually seen to be one of the central bank's most conservative members--who said that the ECB should offer unlimited liquidity for Europe's banks into 2011. With Weber's comments still in investors' minds, the "weaker than expected European PMI data for August did the euro no favors," said the Brown Brothers Harriman analysts. The Australian dollar fell sharply in Asian trading after the country's general election on the weekend failed to deliver a majority to either Prime Minister Julia Gillard's ruling center-left Labor government or her coalition rival Tony Abbot. However, the Australian currency subsequently recovered, and was up to $89.50 from $89.39 late Friday by New York trading. Analysts attributed the currency's strength in part to the news of a takeover bid by London-listed brewer SABMiller PLC for Australian beer-maker Foster's. Canada Morning The Canadian dollar is modestly higher Monday morning as it advances slightly in tandem with other commodity currencies in subdued trading. The U.S. dollar is at C$1.0469 from C$1.0491 late Friday. Prices for crude oil and other commodities are generally higher Monday. There are no significant Canadian data releases Monday and the data calendar is light through the balance of the week. The most significant release of the week, retail sales data for June, comes Tuesday. The Canadian dollar received a significant boost last week after news that BHP Billiton had made a $38.6 billion bid for Potash Corp. of Saskatchewan, but unwound its gains later in the week after a round of disappointing data in Canada and elsewhere. "[Merger and acquisition] speculation continues to simmer in the background while weaker Canadian data--especially Friday's CPI report-- [and the uncertain US economic outlook] has taken the edge off of [Bank of Canada] rate speculation," said a report from TD Securities. -By Frances McInnis, Dow Jones Newswires; 212-416-3417; frances.mcinnis@dowjones.com

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