SINGAPORE, July 10 (Reuters) - The dollar was on the back foot on Monday after a miss in U.S. jobs data scaled back market expectations on how much further the Federal Reserve would need to raise rates, while focus in the Asia day was on China's inflation data release.
The U.S. economy added 209,000 jobs last month, data on Friday showed, marking the smallest increase in 2-1/2 years and the first time in 15 months that payrolls missed expectations.
That sent the dollar tumbling nearly 1% against a basket of currencies on Friday while the yen and sterling surged.
The Japanese yen last bought 142.30 per dollar in early Asia trade on Monday, having jumped 1.4% on Friday in the wake of the greenback's decline and a slump in U.S. Treasury yields.
The dollar/yen pair is particularly sensitive to U.S. yields as interest rates in Japan are anchored near zero.
"I suspect you got a market that was going into (the payrolls) high on expectations ... so with that in mind, people pared back some of those dollar longs," said Chris Weston, head of research at Pepperstone.
"We've also seen large inflows back into the yen as well, we've seen some people looking to cover some of those yen shorts."
The British pound similarly firmed near an over one-year peak of $1.2850 hit on Friday and last traded $1.2829, as bets grow that stubborn inflation in the UK will force the Bank of England to raise interest rates to a 25-year high of 6.5% by December.
The euro dipped marginally to $1.0958, paring some of its 0.7% gain on Friday, while the U.S. dollar index rose 0.09% to 102.38 but remained not far from Friday's two-week low of 102.22.
"I certainly don't trust that U.S. dollar move...whether it's sustained," said Weston. "But it sort of screams out that the market obviously sees the Fed in the later stage of the (monetary tightening) cycle."
In Asia, focus turns to China's consumer prices due later on Monday, where expectations are for inflation to have held steady at 0.2% in June, likely fuelling investor hopes for further support measures from Beijing.
The Australian dollar, which is often used as a liquid proxy for the yuan, was last 0.14% lower at $0.6683, while the New Zealand dollar fell 0.16% to $0.6199.
"We see CPI to remain low as demand stays persistently weak while producer prices fell deeper into deflation," said MUFG analysts in a note.
"We expect more policy measures from the (People's Bank of China) to damp the yuan depreciation expectations, which should offer support to the currency going forward."
The offshore yuan, which has come under pressure in recent months as a result of the country's faltering economic recovery, was last marginally lower at 7.2341 per dollar.
(Reporting by Rae Wee; Editing by Sam Holmes)
