TOKYO, June 9, 2009 (AFP) - The US dollar edged downwards against the yen in sluggish Asian trade on Tuesday as demand for the greenback, earlier buoyed by better-than-expected US payrolls data, subsided, dealers said.

The dollar declined to 98.38 yen ($1.46) in morning trade, against 98.50 in New York late Monday.

The euro rose to US$1.3918 ($2.03) from US$1.3893 in New York but fell slightly to 136.75 yen from 136.93.

"Although US payroll figures were a positive sign, a real economic recovery has yet to be seen," said Jitsuo Tachibana, senior manager at Sumitomo Trust Bank's foreign exchange section.

"The dollar-buying sentiment may recover some time in the short term, but it may not be strong enough to clear the 100 yen hurdle," Tachibana said.

The US dollar had been gaining momentum after the US Labor Department said Friday the number of job losses slowed to 345,000 from 539,000 in April, signalling the pace of massive job cuts is easing.

Some investors say they are now expecting a possible US rate hike in the coming months, changing the landscape for currency markets with dollar investments potentially yielding a better return.

"But it's still too early to regard a rate hike as a key trading element," Tachibana said.

The euro moderately rebounded on profit-taking after facing selling pressure when Standard and Poor's cut eurozone member Ireland's long-term sovereign credit rating and maintained its negative outlook.

Ireland's finances have been savaged by a costly rescue package for the banking sector.