Investing.com - The U.S. dollar rose to one-week highs against the yen on Monday, as strong employment and factory data underpinned demand for the greenback, but the Federal Reserve's more cautious stance on monetary policy looked likely to hold gains in check.
Data on Friday showed that the U.S. economy created 304,000 jobs in January, the most in 11 months, while a closely watched survey from the Institute of Supply Management showed manufacturing activity surprisingly picked up in January.
The stronger-than-expected data eased concerns over a possible slowdown in the U.S. economy, leading traders to trim expectations the Fed would need to cut interest rates to support the economy later this year.
The dollar gained ground against the yen, with USD/JPY climbing 0.36% to 109.85 by 03:32 AM ET (08:32 GMT), the highest since Jan. 25.
"The non-farm payroll was a strong number and is supporting the dollar. A dovish Fed had hit the dollar/yen but rising stocks and solid U.S. data have led to this bounce back," said Nick Twidale, chief operating officer at Rakuten Securities.
In broader moves, currency markets stayed in tight ranges, with EUR/USD last at 1.1444 and GBP/USD at 1.3076.
China's financial markets are closed all week for the Lunar New Year holiday and other Asian markets are closed for parts of the week, keeping market activity subdued.
The Australian dollar was lower, with AUD/USD down 0.26% to 0.7228 after the release of weaker-than-expected building approvals data.
Traders are now focusing on the Reserve Bank of Australia's monetary policy meeting on Tuesday, where it is widely expected to keep the cash rate steady.
Weakening economic data has led analysts to feel the RBA would most likely keep monetary policy accommodative.
"Market expectations have emerged for a rate cut as opposed to the RBA’s view that the next move in rates is an increase. The RBA will also need to temper its optimistic economic outlook" in Tuesday's monetary policy statement, said Philip Wee, currency strategist at DBS, in a note.
The New Zealand dollar was a touch lower, with NZD/USD dipping 0.12% to 0.6888.
The U.S. dollar index, a gauge of its value versus six major peers, was up 0.14% to 95.43.
-- Reuters contributed to this report