The dollar dipped against the yen on Monday, slipping towards a 15-year low, after a disappointing U.S. July payrolls report boosted talk the Federal Reserve could consider further easing monetary policy as early as this week.

The dollar stood at 85.43 yen JPY=, down 0.1 percent from levels seen in late U.S. trade on Friday when it hit an eight-month trough of 85.02 yen on trading platform EBS.

Players were nervously watching whether the greenback would fall beyond its November low of 84.82 yen, which would take it to its lowest in 15 years.

A fall beyond the November milestone could open the way for the greenback to slide to an all-time low below 80 yen, hit in 1995, and could fuel talk of Japanese intervention to rein in the yen's climb.

Dollar/yen saw light selling in early Asian trade, while some demand underpinned the greenback, traders said. Hefty buy orders were seen in the 84.90-85.00 yen area, but below that awaits a minefield of stop-loss orders, they said.

Figures in the U.S. jobs data were poor, supporting views that the dollar will further weaken against the yen, although there is no sense of panic in the market, said a trader at a European bank.

Most players now expect the Fed to discuss additional steps to relax its monetary policy tomorrow. In fact, it's so priced into the market that share prices could fall if the Fed doesn't do it, the trader said.

The Fed's policy-setting committee meets on Tuesday.

Data showed on Friday that overall U.S. non-farm payrolls fell 131,000 in July, while private employment, a better gauge of labour market health, rose a modest 71,000, below forecasts for a gain of 90,000.

The employment report has sent two-year U.S. Treasury yields to record lows, further hurting the dollar's yield appeal. [US/]

The positive correlation between U.S. and Japanese two-year yield spreads, which have been narrowing, and the dollar/yen rate has strengthened to its highest since the period just after the Lehman-shock two years ago.

Given that correlation, players believe it is a matter of the time before the dollar hits a 15-year low against the yen.

Activity was subdued in Asian trade as financial markets in Singapore were shut for a national holiday, while many Japanese investors were gone for the summer Obon holidays this week.


Traders and analysts said the dollar is seen extending its slide if the Fed on Tuesday considers, or even launches, an additional policy easing measure to help support a U.S. recovery that looks as if it is losing momentum.

The dollar is highly likely to fall below 85 yen, possibly dropping beyond 84 yen if the Fed mentions a concrete plan to help the economy, said Masafumi Yamamoto, chief FX strategist at Barclays Capital.

Meanwhile, a sense of urgency is still missing among Japanese authorities, with regards to possible market intervention.

The Bank of Japan also meets this week. As long as the yen's climb is a gradual one, the central bank is likely to stand pat on policy at its Aug. 9-10 meeting and stick to its view that the economy is on track for a moderate recovery.

But it is closely watching market moves and may consider easing policy further if the yen soars towards an all-time high against the dollar at a pace fast enough to damage business sentiment.

The euro was steady on the day at $1.3281 EUR=, staying within sight of a three-month peak of $1.3334 struck on Friday.

The dollar's general weakness could keep the euro buoyant in the near-term, but profit-taking on a rally in euro/dollar is expected to increase as the euro approaches the psychologically key 1.3500 level. That level almost coincides with the 50 percent retracement of the single European currency's fall from a November peak of $1.5145 to a four-year trough of $1.1876 hit in June.

Analysts said the greenback could benefit when investors pocket profits on the euro. The dollar is also likely to receive support as the dollar index approaches technically important levels, such as its April low of 80.031 and March trough of 79.507, analysts said.

The dollar index was little moved at 80.377 .DXY. (Additional contribution from Reuters analyst Krishna Kumar in Sydney; Editing by Joseph Radford)