By Masayuki Kitano
TOKYO, May 30 (Reuters) - The dollar steadied on Friday,
hovering near a three-month high against the yen after an upward
revision to U.S. economic growth figures underscored expectations
for the Federal Reserve to raise interest rates this year.
A jump in U.S. bond yields and a drop in oil prices on
Thursday also helped trigger short-covering in the dollar, which
has rebounded broadly this week as oil prices fell back and data
helped ease concerns about the U.S. economy's outlook.
"The dollar could see a sustained rebound," said Koji Fukaya,
senior currency strategist for Deutsche Securities, adding that
the recent rises in U.S. bond yields augured well for the dollar.
"The dollar will probably edge higher gradually, towards 106
yen and 107 yen," Fukaya said.
The dollar was little changed from late Thursday U.S. trade
at 105.46 yen <JPY=>, staying near a three-month high of 105.88
yen struck on electronic trading platform EBS on Thursday.
The dollar rose as high as 105.73 yen earlier on Friday
before slipping back.
"Japanese exporters have been selling the dollar the past two
days," said Hiroshi Yoshida, a forex trader at Shinkin Central
Bank.
The euro was steady at $1.5525 <EUR=>.
U.S. gross domestic product grew at a 0.9 percent annual rate
in the first quarter, in an upward revision from the 0.6 percent
rate estimated a month ago, data showed on Thursday.
[]
Two-year U.S. Treasury yields <US2YT=RR> surged to 2.791
percent on Thursday, their highest since early January, after
Dallas Fed President Richard Fisher said on Wednesday it would be
"unacceptable" for the Fed to be viewed as accepting higher
levels of inflation.
Investors awaited the core PCE price index for April, the
Fed's favourite inflation gauge, for clues about price growth.
The U.S. personal income/spending data is due at 1230 GMT.
EYES ON OIL
U.S. short-term interest rate futures show that investors
widely expect the Federal Reserve to keep interest rates
unchanged at 2.0 percent at its policy meeting in June, and to
raise interest rates later in the year. <FEDWATCH>
Technical signals will turn bullish for the dollar if it
manages to rise above 106 yen and stay there, said a trader for a
major Japanese bank. In that case, the dollar could rise towards
108 yen and then 110 yen, he said.
But one potential risk against the dollar was oil prices and
their volatility, the trader said.
U.S. crude oil futures slid 0.3 percent on Friday to $126.27
a barrel <CLc1>, having retreated from a record high above $135
hit last week.
Moves in oil prices are seen as key for the dollar, as
surging oil prices have fanned fears about the ability of U.S.
consumers and businesses to weather the credit- and housing
market-led downturn.
The dollar has tended to fall when oil prices surge due to
speculation that oil-producing countries may use the increased
dollar-denominated windfall from crude exports to buy euros and
other currencies to diversify their portfolios.
The yen showed a subdued reaction to a batch of Japanese data
released on Friday. Japan's core consumer price index rose 0.9
percent in April from a year earlier, slightly below a consensus
market forecast for a 1.0 percent rise. []
Sterling dipped after data showed that British consumer
confidence fell to its lowest level in 18 years, but later shed
its losses and stood at $1.9762, up from the day's low of $1.9737
<GBP=D4>. []
(Additional reporting by Shinji Kitamura and Rika Otsuka;
Editing by Chris Gallagher)
