The U.S. dollar paused for breath on Tuesday following its best rally this month against major peers as a resilient U.S. labour market bolstered the case for a Federal Reserve rate hike next month.
The yen, which is highly sensitive to long-term U.S. bond yields, managed to claw back some of Monday's more than 1% slide, as the 10-year Treasury yield also slowed down in Tokyo trading after a sharp two-day climb. The Japanese currency came under additional pressure overnight as the new Bank of Japan governor, Kazuo Ueda, vowed to stick with ultra-easy stimulus setting for the time being.
Leading cryptocurrency bitcoin briefly touched $30,000 for the first time since June.
The U.S. dollar index – which measures the greenback against six major counterparts, including the yen – slipped 0.06% in early Asian trading, following a 0.39% advance at the start of the week.
The dollar eased 0.16% to 133.39 yen, after jumping 1.1% overnight.
Traders now see the Fed as 74% likely to raise rates by another quarter point on May 3, after data released on Good Friday showed U.S. employers continued to hire at a strong pace in March, pushing down the jobless rate. Last week, money markets priced a hike next month as a coin toss.
The consumer price index (CPI), due on Wednesday, will be the next major clue for Fed policy direction.
Ten-year Treasury yields reached 3.436% overnight before settling around 3.41% in Tokyo. They had dipped to a seven-month low of 3.253% on Thursday. The dollar index dropped to a two-month low of 101.40 on Wednesday.
"Financial markets have been too pessimistic about the U.S. economy since several small U.S. banks collapsed in March," Commonwealth Bank of Australia strategists Joseph Capurso and Kristina Clifton wrote in a client note, referring to the demise of SVB and Signature Bank.
"Strong underlying CPI is likely to be the catalyst for a change in market pricing for May, and delay pricing for the start of rate cuts," they said, postulating the dollar index could lift toward the 100-day moving average at 103.91 this week.
The euro added 0.14% to $1.08745 following Monday's 0.34% retreat. Sterling ticked up 0.11% to $1.2397 after a 0.23% overnight decline.
The Aussie rose 0.12% to $0.6650, clawing back part of a 0.48% slide in the previous session.
Bitcoin touched a fresh 10-month high at $30,000 in early Tuesday trade before last fetching $29,787, after breaking free of recent ranges on Monday.
The digital token had been stuck between about $26,500 and $29,400 for the previous three weeks.
"It seems many traders are convinced the dollar's days are numbered as it will slowly lose some of that preferred reserve currency status, and that crypto will be one of the beneficiaries," Edward Moya, an analyst at OANDA in New York, wrote in a note.
"Bitcoin's ceiling remains the $30,000 level and how it behaves once it trades north of it will determine if the next major bull phase is upon us."