* Dollar edges up after 2 pct fall last week
* Yen pares gains made after disappointing BOJ easing
* Focus on Friday’s nonfarm payrolls data for July
LONDON, Aug 1 (Reuters) - The dollar recovered on Monday after its poorest weekly performance in three months, while the yen weakened after surging more than 3 percent when the Bank of Japan eased policy less aggressively than expected.
The dollar shed 2 percent last week against a basket of major currencies after the U.S. Federal Reserve gave no hint it would raise interest rates soon, as some had expected it to do, and after disappointing U.S. growth data at the end of the week.
It managed just a 0.2 percent gain on Monday, to 95.672, leaving it close to the 3 1/2-week low of Friday’s 95.384.
“Today’s modest dollar reversal is in response to a bit of an overreaction to last Friday’s GDP release,” said ING currency strategist Viraj Patel, in London.
“Has anything materially changed? Not really in the medium-term - the U.S. consumer remains pretty resilient and this will continue to be the key driver for the U.S. economy.”
U.S. gross domestic product grew at an annual 1.2 percent in April-June, short of the 2.6 percent increase that had been forecast. But strategists said this week’s data, which include the closely watched monthly non-farm payrolls report on Friday, could boost the U.S. currency.
“We’re expecting the U.S. data flow to be very supportive of U.S. yields and the dollar,” said BNP Paribas currency strategist Sam Lynton-Brown, in London.
“Our interpretation of the July statement from the FOMC (Federal Open Market Committee) was that if data continues to remain very strong then September looks well under-priced by the market,” he added.
New York Fed President William Dudley said at a central bankers’ conference in Bali on Monday that the Fed might raise rates before the November U.S. election if the economy and labour market improve quickly, although he added the Fed should be cautious .
The dollar had been rallying before last week, posting five weeks of consecutive gains - its strongest run in a year and a half. The weaker-than-expected GDP report followed a strong payrolls report for June, as well as improving inflation, retail sales and jobless claims data.
In response, speculators raised their bullish U.S. dollar bets to the highest level in nearly five months in the week up to last Tuesday, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday.
The dollar gained 0.2 percent on Monday to 102.54 yen , having fallen more than 3 percent on Friday.
The BOJ disappointed market hopes that it might increase its already huge bond-buying programme or take interest rates further into negative territory. Instead, it increased its purchase of exchange-traded funds and left rates unchanged.
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Additional reporting by Lisa Twaronite in Tokyo; Editing by Hugh Lawson, Larry King
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