The U.S. dollar was holding most of last week's hefty gains in Asia on Monday with shares in the region likely to follow Wall Street lower and add to the general mood of risk aversion.
Still, the early inclination was to take some profits on the dollar, and its index .DXY drifted down by 0.120 percent. That follows a 3.2 pct surge last week, which was the strongest performance since late 2008.
The dollar also edged back to 86.06 yen JPY, from 86.30 late in New York on Friday. The euro EUR= crawled to $1.2771, from $1.2753, but remains well short of Friday's $1.2906 high.
The initial focus was on Japan's gross domestic product (GDP) data at 2350 GMT. The economy is thought to have grown 0.6 percent in the quarter, half that of the first quarter ECONJP.
A soft result would add to pressure for further stimulus from the authorities, either through more quantitative easing or by intervening to rein in the yen.
Traders, however, said the general feeling was the rest of the Group of Seven rich nations would not support intervention, leaving Japan to go it alone.
Anlaysts at RBC Capital Markets also noted the yen was not particularly high in real terms, given Japan had been in deflation for some years.
Against a broader range of currencies, particularly in real terms, the yen is far less strong than it looks against the US$ in isolation, said RBC in a note to clients.
Also, the declining share of the U.S. in Japan's trade and the rise of China, diminishes the importance of the US$ to the Japanese authorities, so long as China delivers the yuan flexibility it promises.
As a result, RBC saw a relatively small risk of outright intervention from the Japanese authorities.
Still, the market is likely to remain anxious with Japanese Prime Minister Naoto Kan reported over the weekend to be concerned by the yen's rise.
Kan said it was yet to be decided how and when he would meet with Bank of Japan Governor Masaaki Shirakawa to discuss the recent surge in the yen. The BOJ in under pressure to take further quantitative steps such as buying yet more JGBs.
While the dollar had benefited in part from safe-haven flows to Treasuries last week, traders said it also owed much to investor positioning.
CFTC data showed speculators had amassed the largest short dollar positions since December in the week to Aug. 10. But the Federal Reserve's downbeat policy statement on Aug. 10 combined with a further step toward quantitative easing triggered a huge flight from risk, forcing a mass unwinding of those positions.
We suspect those shorts have been cleaned out, leaving the market more balanced, said a trader at a local bank in Sydney. That makes it harder for the dollar to rally further.
It's not like the dollar is a great place to invest right now -- the economy is stumbling and yields are near record lows, he added. It can only gain by default, perhaps if the worries over euro zone debt get worse.
Unease over Ireland's banks did resurface last week, while a debt auction in Italy disappointed, widening the yield spreads of periphery euro zone countries over the core.
Traders were now eyeing a debt sale from Ireland on Tuesday.
(Reporting by Wayne Cole)