By Rika Otsuka
TOKYO, April 25 (Reuters) - The dollar steadied against the
euro on Friday, keeping gains made on data that showed signs of
resilience in the U.S. labour market and separate figures that
undermined the single European currency.
The euro was dented on Thursday, easing further from a record
high hit above $1.60 earlier this week, after data showed the
biggest monthly fall in German business sentiment since September
2001, hurting confidence in the euro zone economy.
"There is a feeling of fulfilment among investors after the
euro rose above the key $1.60 level," said Tsutomu Soma, senior
manager of foreign assets at Okasan Securities.
"It is nothing more than a correction and the euro is likely
to regain momentum against the dollar after it is over," he said.
The dollar also got a boost on Thursday after government data
showed the number of U.S. workers filing initial claims for
unemployment benefits unexpectedly fell last week.
[]
But investors were reluctant to take fresh positions on
Friday ahead of the Golden Week string of Japanese holidays that
starts next week, while Australian financial markets were closed
on Friday for a national holiday.
Data showed that Japanese core consumer prices rose 1.2
percent in March from a year earlier, matching a consensus market
forecast and marking the biggest increase in a decade.
[]
The market showed muted reaction to the inflation report as
the data didn't dent expectations that the Bank of Japan will
leave interest rates unchanged at 0.5 percent for a while.
"The rising CPI won't affect the BOJ, which is focusing more
on developments in subprime problems," said Takeshi Minami, chief
economist at Norinchukin Research Institute.
"The next move will be a rate hike, but it won't happen until
late next year when the subprime mess is expected to settle and
put Japan back on track for firm export-led growth," he said.
The euro edged down 0.1 percent from late U.S. trade to
$1.5670 <EUR=>.
On Tuesday, the euro struck the highest level since its
launch in 1999, hitting $1.6020 on trading platform EBS as
investors bet the European Central Bank would raise rates to
fight inflation.
However, weak economic growth data and ECB policymaker
comments on excessive volatility in currency exchange rates then
sparked selling in the currency.
ECB President Jean-Claude Trichet said on Thursday that there
was concern about the implications of currency fluctuations on
financial stability. []
The euro dipped 0.1 percent to 163.26 yen <EURJPY=R>, off a
four-month high of 164.98 yen hit on Wednesday.
The dollar steadied at 104.20 yen <JPY=>, holding near a
two-month high of 104.66 yen hit late last week.
The U.S. unit was also supported as investors looked closely
at whether the Federal Reserve might be ready to pause its
aggressive run of interest rate cuts after an expected
quarter-percentage-point cut next week to 2 percent.
"A 25-basis-point cut has been priced in, but we are watching
to see if the Fed's statement will suggest an end to the run of
cuts," said Junya Tanase, a forex strategist at JPMorgan Chase
Bank in Tokyo. "If that happens, the dollar will be bought."
Short-term U.S. interest rate futures imply about an 80
percent chance of the Fed trimming rates to 2 percent at its
April 29-30 policy meeting, with about a 15 percent chance of no
rate move. <FEDWATCH>
Just over a week ago, futures implied about a 50 percent
chance that the Fed would cut by an aggressive 50 basis points.
(Additional reporting by Tetsushi Kajimoto; Editing by Brent
Kininmont)
