SINGAPORE/SYDNEY (Reuters) - The dollar hit a fresh two-month low versus the yen and eight-month trough against sterling on Monday, staying under pressure after data last week showed disappointing first-quarter economic growth.
The dollar fell to 80.10 yen at one point on trading platform EBS, its lowest level since late February, and was last changing hands at 80.18 yen, down 0.1 percent from late U.S. trade on Friday.
The dollar has come under broad pressure after data on Friday showed U.S. economic growth cooled in the first quarter partly as businesses cut back on investment, bolstering the Federal Reserve's case that interest rates should be kept near zero at least through late 2014.
The slowdown also kept alive market speculation that the Fed may eventually launch another bond buying program, or a third round of quantitative easing.
"A flavor of QE is back in the air, driving the USD lower and risky assets higher," said Sebastien Galy, strategist at Societe Generale.
That would go some way in explaining why sterling has outperformed the U.S. currency, despite Britain's double-dip recession. In fact, sterling's fortunes appeared to have turned a corner and currency speculators are now betting on further gains.
Sterling rose to $1.6289 at one point, its highest level since late August 2011, and was last changing hands at $1.6285, up 0.2 percent from late U.S. trade on Friday.
EYES ON U.S. DATA
The dollar is likely to take cues later this week from a batch of U.S. economic data, including the Institute for Supply Management's (ISM) gauges of the manufacturing and services sectors, as well as U.S. jobs data.
"Clearly if we do get a weak ISM and a 125,000 (increase in payrolls), this dollar weakness is going to continue," said Rob Ryan, FX strategist at BNP Paribas in Singapore, adding that economists at BNP Paribas were predicting an increase of 125,000 U.S. jobs in April.
Such an outcome would be lower than the prevailing market expectation for an increase of 170,000 jobs.
Although Japanese markets were closed on Monday for a holiday, a trader for a major Japanese bank in Singapore said there was some dollar-selling by Japanese exporters.
Helping to limit the dollar's losses, however, were bids from Japanese importers at levels near 80.00 yen, the trader said, adding that his guess was that stop-loss dollar selling may appear at levels below 80.00 yen.
A breach of that round figure could open the way for the dollar to drop towards its 200-day moving average, now near 78.34 yen, in the near term, he added.
"The dollar could fall towards around 78 yen on the back of the liquidation of long positions," the trader said.
The euro held steady at $1.3247, having retreated from a three-week high around $1.3270 hit on Friday.
Traders said a key test for the markets is the outcome of a Spanish bond sale on Thursday.