By Hannah Lang and Amanda Cooper

The Japanese yen struggled near four-decade lows on Monday, raising the risk of official intervention, while the dollar steadied after last week's soft jobs report reduced the odds of an imminent U.S. Federal Reserve interest rate hike.

The yen FX_IDC:USDJPY last traded around 162.3 per dollar, just above last week's low of 162.84, the weakest level since 1986, leaving traders nervous after a sudden surge in buying briefly lifted the currency on Thursday.

The dollar found its feet after having posted its worst weekly performance since April last week, weighed down by a U.S. payrolls report that showed job growth slowed sharply in June. That data, together with weaker oil prices, curbed market expectations for a rate increase this month.

Data showed that U.S. employers added just 57,000 jobs in June, far below expectations. Some economists said the bigger-than-expected slowdown in job growth was likely a delayed response to the Middle East conflict, which has raised gasoline prices and boosted inflation.

Investors are now looking ahead to the release of the minutes of the U.S. central bank's June 16-17 meeting on Wednesday for clues about the rate outlook.

New Fed Chairman Kevin Warsh has given little away so far, other than to say last week that anyone thinking the U.S. central bank may go easy on inflation, which he acknowledged had cooled recently, could be "disappointed."

Still, it remains to be seen whether other Fed officials agree, said David Scutt, strategist with City Index.

"Waller, for example, argued only a few months ago that you'd have to be 'crazy' to consider cutting rates. Will he provide another similarly definitive signal? That's what traders should be watching for," Scutt said, referring to Fed Governor Christopher Waller.

The dollar index TVC:DXY, which tracks the performance of the U.S. currency against six peers, hit a 13-month peak last week, but has since retreated as expectations for a rate hike at the Fed's July 28-29 meeting have faded. It was last up 0.2% at 101.08.

"The risk-reward is no longer as one-sided as it was only a week ago," Scutt said.

YEN VIGIL

The yen remained firmly in the spotlight, as the threat of official intervention kept traders on edge, even though analysts doubt any such move by Tokyo would deliver lasting support.

Moh Siong Sim, currency strategist at OCBC, said the market is still contending with hawkish Fed risk, which is a negative for the yen. However, concerns about potential intervention have stemmed further weakness in the currency.

"In the near term, I would expect the yen to remain under pressure," he said.

Investors are also concerned about Japanese officials abandoning their habit of telegraphing risks, instead signaling a more targeted campaign to squeeze speculators and raise the cost of betting against the yen.

Ben Bennett, head of investment strategy for Asia at L&G Asset Management, expects Japanese authorities to intervene if currency volatility increases, but said "the direction of travel is a function of easy domestic fiscal policy and the big interest-rate differential with the U.S."

"I don't think intervention will change that," he said.

The euro FX:EURUSD traded at $1.142, down 0.13%, but not far off two-week highs, while sterling FX:GBPUSD was up 0.03% at $1.336.