The dollar has taken a breather, giving up much of its recent gains against the yen and euro.

The dollar began forging ahead strongly early last month and hit 126.65 yen in Tokyo on April 2, a level unseen since Oct. 7, 1998. But the uptrend has run out of steam.

After climbing past the 90 cent level in New York late Friday, the euro slid back to 89.83 cents Monday.

Behind the dollar’s strong showing over the past month was a rush to safe havens like U.S. government bonds.

Although the Bank of Japan’s quarterly “tankan” survey for March showed a further fall in business sentiment, the market reacted calmly because the findings were well within the range of expectations.

The emergency economic package announced Friday by Japan went largely unheeded in the currency market, bringing the yen under fresh selling pressure.

The market’s reaction was muted as details of tax breaks and other key points of the package have yet to be worked out.

Undeniably, however, the package is a positive factor for the yen and could work in its favor eventually.

Worries remain over U.S. economic prospects.

The U.S. unemployment rate hit a 20-month high of 4.3 percent in March, fueling fears of a recession.

The worse-than-expected jobs data eroded optimism about anticipated benefits of tax cuts proposed by U.S. President George W. Bush and undermined already badly shaken consumer confidence.

Given the recent spate of worse-than-expected U.S. economic data, the dollar could long remain under downward pressure. Still, the yen’s topside will be capped by position-adjustment sales.

U.S. officials’ recent remarks denying Washington’s stance to tolerate a weak yen are now weighing on the yen.

There was speculation that Washington remains committed to a strong dollar, which it feels is needed to help shore up Japan’s economy. But with gloom deepening over U.S. economic prospects, however, the Bush administration may be having second thoughts about this option.

Even if market sentiment shifts, a steep yen fall against the dollar is unlikely.

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