Dollar steady vs euro, yen blips up on strong data

TOKYO, May 29 (Reuters) The dollar held near a seven-week peak against the euro and a three-month high versus the yen on Tuesday, ahead of a slew of data that may revive receding expectations of a Federal Reserve interest rate cut.

Investors will scrutinise the minutes of the Fed's last rate-setting meeting due on Wednesday, before the release of the second estimate of first-quarter growth data on Thursday and the more important payrolls report due on Friday.

The Japanese currency got a brief lift against the dollar and the euro after figures showing that Japanese unemployment fell to a 9-year low in April and that consumer spending beat the average market forecast in the same month.

The unemployment rate fell to 3.8 percent in April from 4.0 percent in March, while all household spending rose 1.1 percent from the same month a year earlier, outstripping a market forecast for a 0.2 percent gain and underscoring the steady economic recovery in Japan.

But traders said they hesitated to keep buying the low-yielding yen as Japanese individual investors still favour purchasing higher-yielding assets.

''The currency market reacted by buying yen on the falling unemployment and strong household spending data,'' said Minoru Shioiri, senior manager at FX trading at Mitsubishi UFJ Securities.

''But yen buying is not likely to last long because individual investors who sell yen to buy foreign assets are not likely to stop doing so just because the BOJ raises rates by 0.25 percentage point,'' Shioiri added.

The euro was little changed at $1.3450 within sight of a seven-week low of $1.3411 hit last Friday. The single currency was flat against the yen at 163.65 yen near a record high of 164.02 hit last week.

The dollar was flat against the yen at 121.70 after dipping to 121.60 yen after the data. The U.S. currency remains close to 121.89 yen, the highest point since mid-February.

Data last Friday showed existing U.S. home sales in April hit their slowest pace since June 2003, but investors concluded that would not be enough to dent broadly positive dollar sentiment as market players were still convinced the Fed was in no hurry to cut rates from the current 5.25 percent.

The Canadian dollar was off its 29-1/2-year high against the dollar ahead of a Bank of Canada rate decision on Tuesday.

The BOC is widely expected to leave its interest rate at 4.25 percent, but traders will scrutinise its accompanying statement for hints on how aggressively it will try to head off inflation.

The Canadian currency traded flat against the dollar at C$1.0800 in early Asian trade, after reaching C$1.0766 last Friday, its highest level since October 1977.

REUTERS CS SBA BST0630