* The yen touched 161.97 per dollar, its weakest level since

1986

* The dollar index slipped 0.17% to 101.19 but stayed near a

13-month high

* Economists expect Thursday's US jobs report to show

110,000 jobs added and 4.3% unemployment

(Updated in New York morning time)

By Karen Brettell and Amanda Cooper

NEW YORK, June 29 (Reuters) - The dollar edged lower on

Monday but remained near a 13-month high, supported by optimism

over U.S. economic growth, the prospect of Federal Reserve

interest rate hikes, and a continuing AI-driven boom in U.S.

equity markets that has been drawing in capital at a rapid pace.

The Japanese yen also weakened to its lowest levels against

the U.S. currency since 1986.

A more hawkish turn at the Fed's June meeting under new Fed

Chair Kevin Warsh has led traders to increase bets on rate hikes

this year, as policymakers battle to bring down inflation that

is running well above their 2% annual target.

On the economic front, this week's main U.S. focus will be

Thursday's jobs report for June. Three consecutive months of

stronger-than-expected payroll gains have also supported the

Fed's hawkish shift. A turn in the labor market, however, could

prompt a more dovish rethink of the monetary path.

"The labor market appears to have accelerated," said Marc

Chandler, chief market strategist at Bannockburn Global Forex.

"The concerns that the doves had pointed to about labor markets

slowing down seem to have passed."

The data is expected to show that employers added 110,000

jobs last month, while the unemployment rate held steady at

4.3%, according to the median estimate of economists polled by

Reuters.

Traders are also focused on progress to end the war with

Iran.

Iranian and U.S. technical teams working on the

implementation of an interim peace deal are expected to meet in

Doha in the coming days, a source told Reuters on Monday, after

tit-for-tat weekend strikes threatened to derail the fragile

accord.

The dollar index, which tracks the performance of the

U.S. currency against six others, dipped 0.17% to 101.19. The

index is up 2.28% this month, on track for its biggest monthly

gain since July 2025.

"That is quite significant because since April of last year,

there's been so much discussion about the structural decline in

the value of the dollar," Rabobank chief FX strategist Jane

Foley said. "But I think, even if you vehemently believe that,

you've got to admit that there is space for a cyclical uptrend."

Weekly data from the U.S. market regulator showed investors

held their largest bullish position in the dollar relative to

other major currencies since 2019, worth some $36.4 billion,

according to LSEG data.

The euro gained 0.25% to $1.1412, after reaching a

13-month low against the dollar last week; it has lost 2.08%

this month.

The European Central Bank's annual forum starts on Monday,

opened by President Christine Lagarde, followed by a key policy

panel on Wednesday that features Warsh, whose comments will come

under close scrutiny from investors seeking more insight into

the new Fed chief's thinking on the outlook for rates.

The yen touched161.97, its weakest level since

1986.

"The Bank of Japan's long-awaited 25bp rate hike to 1.00%

has done little to offset the still-wide interest rate

differential with the United States, especially after the

Federal Reserve maintained a hawkish stance and signaled rates

are likely to remain elevated for longer," analysts at LMAX

Group said in a report.

Sterling strengthened 0.26% to $1.3235, having

touched its lowest in seven months last week.

Andy Burnham, Britain's prime minister-in-waiting, vowed on

Monday to deliver radical change to the nation's politics by

handing more power to its regions and by encouraging

collaboration over argument in a 10-year mission to spur "good"

growth.

Investors are keen to see who he appoints as finance

minister, which could prove crucial for the outlook for both the

pound and the gilt market. Burnham said any economic plans would

be "backed by discipline" and abiding by the current fiscal

rules.