LONDON (Reuters) - The dollar inched higher on Monday on expectations of strong U.S. data that could signal an early scaling back of monetary stimulus. It rose 0.3 percent to 81.356, moving away from a seven-week low of 80.868 hit last week. The dollar gained against the safe-haven yen as traders moved back in at lower exchange rates. The dollar had initially weakened following disappointing Japanese growth data that prompted investors to trim their exposure to risk. The dollar rose 0.5 percent to 96.79 yen, also pulling away from a seven-week low - of 95.81 yen - set last Thursday. Market players said the near-term outlook for the dollar would hinge on U.S. data due this week, such as Tuesday's retail sales reading which they said was expected to be strong. "The U.S. recovery is fairly on track and probably going to expand this quarter and this could lend the dollar support," said Chris Walker, FX strategist at Barclays Capital. "We look for a full return to dollar appreciation in a couple of weeks." Japan's economy grew an annualized 2.6 percent in April-June, a third straight quarter of expansion but slower than expected, dragging dollar/yen lower. The dollar bounced back after running into bids near 96.00 yen as buyers emerged at lower levels. Another factor likely to determine the near-term direction of dollar-yen is the Tokyo equity market. If share prices continue to weaken on disappointing Japanese data the yen, which usually attracts buyers in times of market stress, could be headed for more gains. "If share prices slide, the 95 yen level (for the dollar) is right around the corner," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation. The yen has shown a strong inverse correlation to Japanese shares in recent weeks, though Japanese data could just as easily persuade the country's central bank to aggressively loosen policy, which could undermine the yen. The euro was down 0.2 percent to $1.3308. The single currency was under pressure after German news magazine Der Spiegel reported on Sunday the Bundesbank was warning Greece would need more financial assistance by early next year. The value of the dollar's net long position fell to $21.62 billion in the week ended August 6 from $24.45 billion, dropping for the third straight week as speculators continued to pare bets in favor of the currency. Dealers said that trend could be about to slow or end.

Source