TOKYO, March 18: The dollar rose against the yen on Monday as confidence in a US economic recovery grew and Japanese stock prices sagged, dealers said.

The greenback traded at 130.42-45 yen against 129.14-16 yen in New York and 129.05-07 yen in Tokyo late Friday.

US consumer data and industrial production confirmed the industrial sector has bottomed, said Minori Takeuchi, foreign exchange analyst at JP Morgan Chase.

Industrial production in the United States in February grew faster than most economists had expected, according to figures out Friday, while a separate report from the University of Michigan showed consumer confidence continuing to strengthen.

Players remained cautious ahead of a US Federal Reserve meeting to set interest rates Tuesday, Takeuchi said.

The majority of the market thinks the bias will be returned to neutral (from easing) so I don’t think it will effect the market, she said, although there might eventually be an impact as rates begin to move higher again.

Our call is for a rate rise in June because of the recent strong economic numbers. Many had expected a rate hike at the end of the year, she said.

If the prospect of an interest rate rise affects the stock market, it will effect capital flows, said Takeuchi.

Short-covering also supported the steady rebound of the US currency, said dealers.

The dollar may be pushed to as high as the 131 yen level this week, said a Credit Lyonnais dealer.

Dealers also said a decline in Tokyo stocks was also behind the dollar’s gain against the yen. The Nikkei-225 index on the Tokyo Stock Exchange closed down 149.63 points, or 1.3 per cent, at 11,498.38.

The euro bought $0.8795-98 against $0.8823-25 in New York and 0.8846-48 in Tokyo late Friday.

Against the yen, the euro was quoted at 114.74, compared with 114.00 in New York and 114.09 in Tokyo Friday afternoon.

The euro was expected to climb as high as $0.8900 this week after buoyant US economic data failed to nudge the European unit lower, DBS Bank said.

Despite the strong economic data from the US last Friday, the euro-dollar held on to its gains, DBS Bank said.

Consequently, we predict that euro-dollar should edge higher to 0.89-0.90 level this week, the Singapore bank said.—AFP