The dollar edged towards the 100 yen mark in afternoon trade in Asia on Tuesday following upbeat US economic figures and as dealers focus on the release this week of further indicators, including jobs data.
Strength in the world's biggest economy is a key factor in the timing of when the US Federal Reserve starts to wind down its massive stimulus drive, a move that usually pushes the dollar higher.
In afternoon Tokyo trade, the greenback fetched 99.76 yen compared with 99.66 yen in New York. Earlier Tuesday the unit touched 99.90 yen as investors cheered a better-than-expected report on manufacturing activity.
The euro was flat at $1.3061 and rose to 130.29 yen from 130.17 yen in New York, after the eurozone also released better-than-forecast manufacturing data.
In the US, the Institute for Supply Management said its purchasing managers index of manufacturing activity moved back into positive territory in June, raising hopes the world's top economy is solidifying its recovery.
Investors are keeping a close eye on US data amid mixed signals from Fed officials about the timing for wrapping up its $85-billion-a-month bond-buying programme, known as quantitative easing.
Fed chief Ben Bernanke last month said the bank may start winding down the scheme later this year, but other senior officials afterwards pointed to a longer timeframe as global markets were sent into a tailspin.
The dollar is expected to benefit when the Fed eventually begins to reel in the programme, which it says will happen when the economy is able to stand on its own feet.
"The dollar traded in a tight range today as players don't want to take positions ahead of US (jobs) figures," said Daisuke Karakama, market economist in the forex division of Mizuho Bank.
The European single currency got a lift after the Markit Eurozone Composite Purchasing Managers Index rose to a 16-month high in June.
The news reduced the likelihood of more monetary easing by European Central Bank (ECB) when it holds a policy meeting this week.
The data "supports the notion that the ECB will refrain from additional policy action as soon as this week", Credit Agricole said.
Also Monday, the Bank of Japan's quarterly Tankan survey showed business confidence among the nation's manufacturers soared on the back of a government drive to kickstart economic growth.
However, Japan is still mired in deflation and inflation expectations remain low.
"From that angle there is little scope for the BoJ to become less dovish anytime soon," Credit Agricole said.
The Australian dollar was down at 91.69 US cents from 91.84 cents after the Australian central bank held off an interest rate cut but indicated there could be more further down the line.
The dollar was mixed against other Asia-Pacific currencies.
The greenback strengthened to Sg$1.2671 from Sg$1.2661 the previous day, to Tw$30.00 from Tw$29.97 and to 43.33 Philippine pesos from 43.07 pesos.
It also gained to 59.37 Indian rupees from 59.31 rupees.
But the unit weakened to 1,133.56 South Korean won from 1,134.60 won, to 9,980 Indonesian rupiah from 9,985 rupiah and to 30.97 Thai baht from 30.99 baht. The Chinese yuan changed hands at 16.27 yen against 16.21 yen.
