Dollar on defensive in Asian trade

The dollar was on the back foot in Asian trade on Monday, pressured by worries that soaring oil prices could hinder a recovery in the US economy, dealers said.

Trade was subdued with US and British markets closed on Monday for a holiday.

Investors were waiting for a batch of economic data due this week as well as speeches by Federal Reserve officials for fresh clues on the outlook for US interest rates.

The dollar slipped to 103.20 yen in Tokyo morning trade from 103.31 in New York late Friday.

The euro firmed to 1.5786 dollars from 1.5761 and was flat at 162.91 yen.

"Oil prices don't seem to be stopping their upwards march and are pressuring the (US) economy," said Kazuhiko Shibata, Tokyo branch manager at Dresdner Bank.

"Recent market optimism that the economy might be nearing the end of its slump has waned," he added.

Rising crude oil and commodities prices have stoked fears of a stagflation, a combination of slowing growth and accelerating inflation.

Crude oil hovered near its record high of 135 dollars per barrel, adding to concerns about the outlook for consumer spending, a key pillar of the world's largest economy.

Worries about the US housing market continued to weigh on traders' minds after an industry report showed existing home sales and prices fell further in April and the backlog of unsold homes on the market rose to a record high.

Even so, there is conjecture that US interest rates may have bottomed given signs of building inflation pressures, dealers said.

The euro meanwhile was supported by speculation that the European Central Bank (ECB) may need to raise interest rates at some point, after German producer prices rose in April at the fastest pace since August 2006.

"Previous expectations that the ECB would lower rates have retreated. Unless inflation calms down, rates may have to rise even if growth worsens to some extent," said Shibata.

Investors were waiting for a slew of US economic data due this week including new home sales, durable goods orders and a second estimate of first-quarter economic growth.

In Japan, inflation, unemployment and industrial production figures are due on Friday.