LONDON: The dollar traded near a one-month high against the yen on Monday as improving sentiment on global growth and waning expectations of an imminent military strike on Syria reduced demand for the safe-haven Japanese currency.
The dollar was up 1.0 percent at 99.12 yen, having earlier hit 99.435 yen, which was its highest since Aug. 2. The euro rose 1.0 percent to 131.00 yen.
The yen, which tends to benefit from market turmoil, was recently buoyed by escalating tensions over Syria and speculation that the Federal Reserve could begin scaling back monetary stimulus.
But the delay in the possible strike against Syria after US President Barack Obama decided to seek congressional approval, thus opening the risk that Congress will not support such action, has reduced market tension and demand for the safety of the yen.
Added to that, data showing that factories in China and Europe had experienced robust growth pointed to a recovery in the global economy and helped boost market sentiment.
"We see an improvement in investor risk sentiment on Syria. Also the China PMI data is a key driver as it is helping ease investor pessimism over the China growth outlook," said Lee Hardman, currency economist at Bank of Tokyo Mitsubishi.
"All this is encouraging some renewed risk seeking behaviour by investors this week," he said adding that he expected the dollar to test the 100-yen level in coming sessions.
Strategists said the yen was also weighed down by Japan's decision last week to hike sales tax after members of a special advisory board said such a move would not hurt the economy if coupled with other stimulus.
"Backing of the sales tax paves the way for a continuous easing of monetary policy by the Bank of Japan. This is hurting the yen," said Arne Lohmann Rasmussen, head of FX research at Danske Bank.
The latest Commodity Futures Trading Commission data showed currency speculators had increased their bets in favour of the dollar and were bullish on the euro.
The euro was down 0.1 percent at $1.3204 against the buoyant dollar.
US markets were closed on Monday for Labor Day but analysts said currency moves later were likely to be dictated by a barrage of economic data this week, including Friday's US jobs report. Before that, the European Central Bank and the Bank of England hold policy meetings.
Strategists said the US non-farm payrolls figure would be watched closely for whether it will support expectations that the Fed will pare back its stimulus in September.
"There would be a lot of focus on the labour market report. It is likely to be dollar positive as we expect a decent number and that will clear the way for Fed tapering at the September meeting," Danske Bank's Rasmussen said.
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