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By Bloomberg

The dollar held its first two-week gain since March, as investors look to U.S. jobs data this week for evidence the economy is strong enough for the Federal Reserve to raise interest rates this year.

A gauge of the currency against its peers was near a six- week high after data showed hedge funds and other speculators strengthening their backing for a dollar rally. The euro weakened as Greece struggled to seal an accord with the International Monetary Fund, to which the nation owes the first of four payments this month on June 5. The Reserve Bank of Australia will set monetary policy Tuesday.

“Traders will look at this week’s data with a little bit of caution, but the main thing is, if the euro is losing ground, naturally you find the U.S. dollar tends to benefit from that,” said Stan Shamu, a markets strategist in Melbourne at IG Ltd. “Traders will probably stay long heading into payrolls data.”

The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 major trading partners, was little changed at 1,192.72 at 6:48 a.m. in London on Monday, after reaching 1,197.76 on May 28, the highest level since April 15.

The dollar rose 0.3 percent to $1.0959 per euro. It was little changed at 124.12 yen after touching 124.46 on May 28, the highest since December 2002.

“The dollar may be losing some of its steam and face profit-taking pressures in the near term,” said Takuya Kawabata, an analyst at Tokyo-based Gaitame.com Research Institute Ltd. “If expectations for a rate hike this year are still intact, the dollar can test its upside against the yen.”

Government data on June 5 will show U.S. payrolls increased by 225,000 in May after gaining by 223,000 in April, according to the median estimate of analysts surveyed by Bloomberg.

Dollar Bulls

The difference in the number of bets on a rise in the dollar compared with those on a loss against eight of the greenback’s major peers increased by 48,829 contracts in the week ended May 26, according to Commodity Futures Trading Commission data compiled by Bloomberg.

“While the dollar may fluctuate this week before Friday’s nonfarm payrolls, its undercurrent remains solid,” Toshiya Yamauchi, a senior analyst in Tokyo at Ueda Harlow Ltd., a margin-trading services provider, wrote in a note to clients.

The euro dropped 2.1 percent last month. It fell 0.3 percent to 136 yen on Monday.

Greece faces a week of tough decisions as negotiations over a financial lifeline edged closer toward an endgame with creditors showing no signs of budging over what it will take for them to release more money.

Elusive Deal

“There’s a lot of uncertainty on that front and traders just aren’t willing to take the risk,” IG’s Shamu said. “Without any positive rhetoric suggesting they are closer to a deal, it makes it really hard for traders to find any conditions” that justify being long on the euro. “Naturally sellers tend to win,” he said.

Kengo Suzuki, chief currency strategist at Mizuho Securities Co. in Tokyo, said negotiations may continue through mid-June, keeping the euro pressured and possibly pushing it toward $1.05 later this year.

The Aussie added 0.1 percent to 76.52 U.S. cents from Friday, after touching a six-week low of 76.18 on May 28.

Data on Monday showed a factory gauge in China, Australia’s biggest trading partner, increased last month, suggesting the government’s monetary easing and relaxation of fiscal rules have helped cushion the Asian economy.

RBA Governor Glenn Stevens and his board will keep the cash rate at a record-low 2 percent at Tuesday’s meeting in Sydney, markets and economists predict.

The pace and timing of a recovery in non-mining business investment remains a significant source of uncertainty, Australian Treasury Secretary John Fraser said in testimony to a parliamentary committee in Canberra on Monday.