The dollar was little changed against major currencies on Monday, taking a breather from a two-day slide as investors awaited more clues on the policy outlooks for the Federal Reserve and European Central Bank.
The yen gave up initial gains as losses in Asian stock markets were limited and oil prices slipped slightly from record peaks near $126 a barrel, which has hurt equities and prompted some investors to cut back on carry trades.
New York's main oil futures contract, light sweet crude for June delivery, was 56 cents lower at 125.40 dollars a barrel. The benchmark contract closed on Friday at 125.96 dollars after spiking to a record 126.25 dollars in intraday trading at the New York Mercantile Exchange.
Japan's Nikkei average fell 0.5 percent but held near a four-month peak struck last week.
Traders typically use the performance of stocks as a thermometer of risk appetite and whether to hold carry trades -- borrowing the low-yielding yen to buy higher-yielding currencies. When stocks fall, carry trades are trimmed and the yen pushes higher.
The relentless rise in oil prices to record peaks has taken some of the wind out of the rebound in stocks since the credit crisis peaked in mid-March with the collapse of US investment bank Bear Stearns.
Violence in the Middle East was the latest factor keeping crude oil prices near record peaks on worries about supply disruptions from the world's biggest producing region.
Otherwise, investors were looking for more signs that the euro zone economy is slowing as they start to suspect the European Central Bank could start a move towards trimming rates, even as the Federal Reserve is seen keeping rates on hold.
A string of poor economic data in the euro zone, along with the outlook for the Fed to keep rates steady, drove the dollar's rebound to two-month highs against the euro and a basket of major currencies last week.
'It will take time for markets to make conclusions about the relative monetary policy outlooks,' said Tomoko Fujii, head of Japan economics and strategy at Bank of America.
'It is not easy to draw conclusions about whether the Fed is really done or not.' The dollar fetched 102.98 yen up 0.2 percent from US trade late last week and rising from an early low of 102.57 yen.
Traders said dollar demand from some players like Japanese importers, which are grappling with the steep rise in commodity prices, helped lift the US currency.
The euro drifted sideways at $1.5465 and has edged up from a two-month trough of $1.5280 hit last Thursday.
The single currency was little changed at 159.28 yen pulling up from a one-month low of 158.60 yen hit on Friday.
The New Zealand dollar slipped after data showed house prices cooled for an eighth straight month in April, adding to signs of slowing growth that has stirred expectations for interest rate cuts later in the year.
The kiwi dipped 0.3 percent to $0.7663 and was near a four-month low of $0.7650 hit last week. - Reuters