TOKYO: The euro strengthened in Asian trade on Tuesday ahead of a European Central Bank meeting in which dealers are hoping officials announce fresh measures to battle the eurozone debt crisis.
The common currency bought $1.2610 and 98.83 yen in Tokyo afternoon trade, compared with $1.2598 and 98.68 yen in London late Monday. The US market was closed Monday for the Labor Day holiday.
The dollar was at 78.35 yen against 78.32 yen in Europe.
The euro saw "sentiment turning slightly bullish" on speculation the ECB meeting Thursday will usher in a fresh round of bond-buying programme, said Osao Iizuka, head of forex trading at Sumitomo Mitsui Trust Bank.
The bond purchases were designed to lower public borrowing costs among crisis-hit nations such as Spain and Italy.
However, optimism was tempered by data Monday showing eurozone manufacturing activity contracted for a seventh month in a row in August.
That came on top of news that China's manufacturing activity fell to its lowest level in more than three years in August.
Traders are also looking to US jobs data later in the week, with dollar-yen trade likely to move within a narrow band until then, Iizuka said.
The Reserve Bank of Australia kept rates on hold at 3.50 percent at a policy meeting on Tuesday, showing a lack of urgency towards easing monetary policy.
The Australian dollar was changing hands at $1.0270 after the rate decision, up from $1.0260 a day earlier.
The dollar was mixed against other Asia-Pacific currencies.
It fell to Sg$1.2442 from Sg$1.2475 on Monday, to 31.19 Thai baht from 31.26 baht, to 9,575 Indonesian rupiah from 9,586 rupiah, to 41.87 Philippine pesos from 42.03 pesos and to Tw$29.82 from Tw$29.88.
The greenback firmed to 55.44 Indian rupees from 55.42 rupees and to 1,131.55 South Korean won from 1,130.90 won. The Chinese yuan bought 12.33 yen against 12.34 yen.
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