LONDON: The dollar rose against the yen on Monday as optimism about the US economy resurfaced after Friday's above-forecast jobs data while the euro struggled on more evidence of euro zone weakness. But volumes were thin due to holidays in Japan and the UK. Expectations the Federal Reserve may start to reduce asset purchases under its quantitative easing programme later this year resurfaced after Friday's data. This was a change from the recent perception that the Fed could even step up asset purchases after a run of softer data. The dollar was up 0.4 per cent at 99.39 yen, extending gains after Friday's 1 per cent rise. This brought it nearer the 100 yen mark that has been strong resistance in recent weeks. "The US labour market report has brought the market back to talking about when the Fed could exit QE ... This could be enough to push the dollar above 100 yen," said Arne Lohmann Rasmussen, head of FX research at Danske Bank in Copenhagen. Against a basket of currencies the dollar was up 0.1 per cent at 82.163. The yen is expected to weaken given a Bank of Japan pledge to inject $1.4 trillion into the economy. EURO SEEN STRUGGLING The euro was down 0.1 per cent at $1.3106 against the dollar, having hit a two-month high of $1.3243 last week. Surveys on Monday showed euro zone private sector activity faltered again in April, suggesting the region may fall deeper into recession this quarter. Analysts said the euro could drop further after European Central Bank President Mario Draghi said last week the bank was technically ready for negative deposit rates. "The risks are now tilted to the downside for euro/dollar and it could test $1.30," said Danske Bank's Rasmussen. A negative deposit rate would penalise banks for hoarding cash and could drive money out of the euro zone. However, ECB policymakers on Friday played down prospects of a near-term cut, while recent falls in Italian and Spanish borrowing costs also buoyed the currency. This helped the euro rise 0.4 per cent against the yen to a two-week high of 130.40 yen. The Australian dollar fell 0.6 per cent to $1.0258, hurt by a surprise drop in retail sales and slower Chinese services activity. The Reserve Bank of Australia meets on Tuesday. Markets imply a 50-50 chance of a quarter-point interest rate cut, but a Reuters poll showed most economists see rates steady at 3.0 per cent. Alvin Pontoh, Asia-Pacific strategist for TD Securities in Singapore, expected the Aussie to gain if the RBA holds rates.

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