TOKYO, Dec 10: The dollar rose against the yen on Monday and was set to test new highs on growing optimism over the US economy and the expectation of further grim data from Japan later this week, dealers said.

The greenback traded at 125.82-84 yen up from 125.54 yen in New York and 124.90-93 yen in Tokyo late Friday.

US economic figures are mixed, some good and some bad. When the bad figures come out the market does not really care, but when the good ones appear then they do care and so that is why they are happy to buy the dollar, said Ko Haruki, HSBC foreign exchange manager.

Last week fresh data showed unemployment in the US surged to 5.7 per cent in November, when the US economy shed 331,000 jobs.

The dollar/yen will test the upside this week. It is (already) the highest level we have seen this year, Haruki said.

News the war in Afghanistan appears to be drawing to a close also offered support for the dollar. Market participants are quite relieved that the Afghan problem appears to be easing, he said.

Also on Wednesday we have the Bank of Japan’s Tankan report and the figures are bound to be much worse than those we saw in September and then we will see a higher level.

The key quarterly survey on business confidence is expected to show corporate gloom has penetrated deep into the heart of Japan Inc. after confirmation last week the world’s number two economy has fallen into its third recession in a decade.

This morning the dollar hit 125.87 yen but then overseas profit-taking and options-related selling, as well as Japanese offers, appeared in the region of 125.80-90, said Standard and Poor’s MMS managing analyst Hideki Naito.

The dollar/yen retains its relatively firm tone. The trend remains towards the topside but maybe the perception is that, at the year’s high of 126.84 yen, some people will try to take profits so the upward movement may be slow.

Meanwhile, the euro bought $0.8915-17 against 0.8897 in New York and 0.8937-40 in Tokyo late Friday.

Trading in the euro-dollar remained lacklustre as market players wind down their exposure ahead of the year-end holidays, dealers in Singapore said.

The market is not ready to do anything at the moment, even if the war looks to be in the Americans’ favour, said a dealer at BNP Paribas.

He said the euro would continue to trade between $0.8840 and 0.8950.

Against the yen, the euro was quoted at 112.19 up from 111.96 in New York and 111.65 in Tokyo Friday afternoon.

In late Singapore trade, the dollar rose to 43.875 Thai baht from Friday’s 43.80, 1.8338 Singapore dollars from 1.8312, 1,282.65 South Korean won from 1,273.25, and 34.4575 Taiwan dollars from 34.4535.

It was steady at 51.945 Philippines pesos but fell to 10,285 Indonesian rupiah from 10,380.—AFP