TOKYO: The dollar rebounded in Asia Tuesday as markets eye key US economic data while signs that Japan will usher in tax hikes to chop its monster debt lifted investor spirits, dealers said.
The dollar bought 97.22 yen in morning Tokyo trade, strengthening from 96.90 yen in New York on Monday.
The euro was mixed at $1.3294 and 129.22 yen, compared with $1.3299 and 128.84 yen in US trading.
The US unit's rise came as the Nikkei stock index closed out the morning session 1.35 percent higher, with buoyant market sentiment upping investors' risk sentiment which supports the dollar.
Dollar-yen trading and the local stock market are closely intertwined as the value of the yen is closely linked to the profitability of the Japanese exporters.
Also Tuesday, a report in the leading Nikkei business daily said Japanese Prime Minister Shinzo Abe was reviewing a possible corporate tax rate cut in a bid to stoke growth and offset the impact of a national sales tax hike.
Tokyo is mulling lifting Japan's consumption tax in a bid to bring down a debt pile that is the worst in the industrialised world at more than twice the size of the economy.
Weaker-than-expected GDP data for the second quarter on Monday had nervous investors speculating that Abe may hold off the tax rise.
Osamu Takashima, chief FX strategist at Citigroup Global Markets Japan, said going ahead with the tax rise was a positive for the dollar-yen pair as it boosts investors' appetite for risk. The yen is considered a safe-haven currency in times of uncertainty.
The dollar has been weak since mid-July, and that was reinforced by a disappointing US jobs report earlier this month which suggested the Federal Reserve might delay plans to scale back its huge bond-buying programme, known as quantitative easing.
Markets are keeping a close eye on a string of data this week, including retail sales data later Tuesday, for clues about the state of the world's largest economy.
A pull back on the Fed programme would mean fewer dollars in the financial system, boosting demand and the greenback's value.
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