4 Min Read
* Investors warily monitor developments in North Korea
* Liquidity seen thin due to Japan's Golden Week holidays
* Fed meeting, U.S. jobs data awaited this week
TOKYO, May 1 (Reuters) - The dollar started the week on the back foot on Monday, as solid European inflation data lifted the euro and continuing tensions with North Korea underpinned the perceived safe-haven yen.
The dollar index, which tracks the greenback against a basket of six rival currencies, edged down 0.1 percent to 98.963.
Against its Japanese counterpart, the dollar slipped 0.2 percent to 111.33.
The dollar touched a session high of 111.72 yen on Friday, a within a few ticks of last week's nearly four-week high of 111.78 hit on April 26.
U.S. Labor Department data on Friday showed private wages and salaries accelerated 0.9 percent in the first quarter to mark the largest increase in 10 years, suggesting the U.S. Federal Reserve might still hike interest rates two more times this year.
The firm wage growth helped offset other data on Friday that showed U.S. economy grew at its weakest pace in three years in the first quarter as consumer spending almost stalled.
"Dollar/yen is holding up, despite the weaker U.S. GDP," said Masafumi Yamamoto, chief currency strategist for Mizuho Securities in Tokyo.
"But there's geopolitical risk lingering here, so it will probably trade with a heavy tone," he said, as market participants continued to watch for any developments with North Korea.
On Sunday, U.S. President Donald Trump increased diplomatic contacts with allies in Asia to secure their cooperation to pressure North Korea its nuclear bomb and missile programs.
Tokyo markets will be closed for three days from Wednesday for a string of holidays known as Golden Week, and many investors take additional time off. Liquidity is likely to be thin in Asian trading.
The Fed will meet on Wednesday this week, with no policy changes expected this month, while the U.S. employment report for April will be released on Friday.
The euro edged up 0.1 percent to $1.0906, underpinned by solid euro zone inflation figures on Friday that analysts said could prompt the European Central Bank to take a more hawkish stance in its June statements.
Official flash estimates put euro zone inflation at 1.9 percent in the first quarter, above estimates for a rise of 1.8 percent. The ECB's target is below but close to 2 percent.
Euro short positioning eased in the week ended April 25, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday, after independent centrist Emmanuel Macron came out ahead of anti-European Union rightist Marine Le Pen in the first round of the French election last weekend.
Meanwhile, net shorts on the Canadian dollar that week ballooned to 42,642 contracts, the largest since early February 2016 as the United States worked to renegotiate the terms of its NAFTA deal with Canada and Mexico.
The dollar edged down 0.1 percent against the Canadian dollar on Monday to C$1.3640 after logging a 14-month high of C$1.3697 on Friday. (Reporting by Tokyo markets team; Editing by Eric Meijer)