SYDNEY: The U.S. dollar got off to a sluggish start in Asia on Monday, having slipped late last week as investors took some profits although analysts still expect its longer-term uptrend to stay intact.
The dollar bought 104.01 yen, having stepped back from a five-year peak of 104.64 scaled on Friday. The euro, which slid to a two-week trough of $1.3625, last stood at $1.3670.
Trading could be choppy this week as liquidity dries up with many markets across the globe shut on Wednesday for the Christmas holiday. Japanese financial markets are closed on Monday for the Emperor's Birthday.
"Between now and the return of full liquidity, beware the high volatility often associated to low liquidity. Breakouts without the satisfying follow through are common in such conditions," said John Kicklighter, chief currency strategist at DailyFX.
The greenback rose last week after the Federal Reserve took a first step towards winding down its massive stimulus program, trimming its monthly asset purchases by $10 billion to $75 billion.
The outcome was not a total surprise and had a brief impact on markets given investors had been speculating for months on the timing of such action.
Data on Friday supported the Fed's decision with revised figures showing the world's biggest economy grew at its fastest pace in almost two years in the third quarter.
"Maintaining dollar momentum still requires upcoming U.S. data to meet a certain threshold of strength," analysts at BNP Paribas wrote in a note to clients.
"However, with the Fed having begun the tapering process now, the burden of proof has shifted somewhat - data now has to be just strong enough to keep tapering on track, as opposed to the presumably stronger track record needed to justify a start to the tapering process."
U.S. data due for release this week include personal income and spending on Monday and durable goods on Tuesday.
Investors are also keeping an eye on China's money markets after the country's central bank last week sought to allay fears of a cash crunch by injecting $50 billion in three days into the interbank market.
The pullback in the greenback helped lift both the Australian and the Canadian dollars off 3-1/2 year troughs. The Aussie was last at $0.8923, while the loonie traded at C$1.0639 per U.S. dollar.
In contrast to the Fed, the Bank of Japan last week maintained its ultra-loose monetary policy although it played down chances of the need for more stimulus next year.
Still, with the BOJ nowhere close to scaling back support for the economy, analysts expect the yen to remain the funding currency of choice in carry trades.
The euro was a touch softer against the yen at 142.15 in early Monday trade, but still near a five-year peak of 142.90 set last week.
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