TOKYO, Japan -- The dollar dipped against the yen Monday as falling global stocks and a sharp shift in expectations for Australian interest rates prompted investors to unwind carry trades favoring higher-yielding currencies.

But the dollar held near a five-week high against the euro struck last week after data showed US companies cut fewer workers than expected in July, providing some hope that the battered economy was stabilizing.

The US currency has staged a broad recovery as mounting signs of a broader global economic slowdown prompted investors to sell other major currencies where there was a possibility of higher rates.

The Australian dollar took a big hit as investors were caught off guard by a sharp shift in expectations towards interest rate cuts, which tumbled nearly 3.0 percent against the yen last week for its biggest weekly drop since the Bear Stearns collapse in March.

Falling global stock markets have made market players cautious about holding risky carry trade positions, although the once tight link between the performance of stocks and carry trades has weakened in the past few months.

In early trade, Japan's Nikkei share average fell 1.0 percent. Wall Street shares retreated Friday, partly after General Motors recorded a $15.5-billion quarterly loss and had its credit ratings downgraded further into junk territory.

Analysts said the dollar could benefit by default as downgrades to the growth outlook for the euro zone and major economies hurt other currencies, even as the greenback was dogged by the shaky US economy and financial system.

"The increased possibility of rate cuts by central banks other than the Fed could propel a stronger dollar," said currency strategists at UBS in a note to clients.

This week's events will feature a slew of central bank meetings including the Federal Reserve, the Reserve Bank of Australia, the Bank of England and the European Central Bank (ECB).

The dollar dipped to 107.56 yen down 0.1 percent from late US trade last week.

The euro was little changed at $1.5574 just above a five-week low of $1.5514 struck on trading platform EBS on Friday.

The dollar might have a tougher time climbing against the euro as speculators on the International Monetary Market shifted to a short position in the single currency through last Tuesday, analysts said.

The overall dollar position also shifted to a net long for the first time since June, showing investors favored the US currency slightly.

Dollar gains were also limited as oil prices jumped above $126 a barrel on jitters after the United States said world powers had no choice but to increase sanctions on Iran after an informal deadline lapsed on an offer of talks on its nuclear program.

Oil prices also rose as a tropical storm formed in the Gulf of Mexico near US oil and gas facilities.

Against the yen, the euro slipped 0.1 percent to 167.50 yen.