Growth in China's services sector fell to a four-month low in December as business expectations dropped, a government survey showed Friday, adding to evidence that the world's second-largest economy lost steam into the close of 2013.
"January is a bit of a messy month for foreign exchange,'' said Simon Smith, head of research at FxPro. ``Volumes are still thin ... things are very much driven by flows.
''I don't think the yen is a one-way bet in 2014. The easy wins have been had. Always the most run-over people in the markets are yen bears.`` Smith expects dollar/yen to end the year at 109 yen per dollar.
(Read more: Euro set to be 2013's top-performing major currency)
Betting on the dollar against the yen has been a big trade for hedge funds and other investors over the past year, who see the Bank of Japan's ultra-loose monetary policy and potential for more stimulus this year as one of the clearer themes in tricky currency markets.
Looking ahead, next week will include the release of the minutes from the Federal Reserve's December meeting and key U.S. labor market data.
The Fed's meeting minutes will be closely watched on Wednesday for signs over how far the Fed may further reduce its bond-buying program. Last month the central bank said it would cut the mortgage-backed securities and Treasuries purchases by $10 billion to $75 billion a month.
Meanwhile, the euro—whose second-half rally was driven by factors such as euro zone banks repatriating funds to shore up their capital bases and repaying cheap loans to the European Central Bank—has retreated from a two-year high of $1.3892 touched last Friday.
The euro hit a four-week low against the dollar of $1.3598 and was last at $1.3601, down 0.5 percent, according to Reuters data.