- Dollar index steady after pulling back from 2-week low
- Fundamentals seen supporting dollar, US yields near 6-wk high
- Euro hit overnight after ECB stays on policy course
- Dollar/yen capped ahead of next week's BOJ policy meeting
The dollar rose on Friday to its highest level in five days as investors waited to see if U.S. economic growth figures do anything to interrupt its months of strength.
U.S. President Donald Trump has expressed displeasure over the dollar’s strength, ignoring a custom that U.S. leaders avoid openly interfering in financial markets.
But the currency has stuck stubbornly close to a one-year peak scaled last week.
On Friday the dollar climbed further, gaining 0.4 percent overnight against a basket of its peers to reach 94.796, a five-day high, before trading flat.
The euro meanwhile recouped some of the losses it suffered on Thursday when the European Central Bank kept to its planned timetable to move away from its accommodative monetary policy.
The euro’s downturn helped the dollar but the U.S. currency also enjoyed support from the 10-year U.S. Treasury note yield which extended its overnight rise and touched a six-week high of nearly three percent.
Traders are braced for a potentially strong reading of U.S. gross domestic product (GDP) data, set for release later on Friday.
The U.S. economy is expected to have grown at a 4.1 percent annualized rate in the second quarter, following 2.0 percent in the first quarter.
“The dollar is higher across the board and this reflects the lift it is enjoying from fundamental factors, notably higher U.S. yields and Wall Street shares amid improving risk appetite,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.
But analysts at ING said the dollar could broadly weaken after the release because the GDP figures had been inflated by tariff-related trade activity and high inventories instead of economic fundamentals.
The euro was virtually flat at $1.1654.
The single currency had sunk more than 0.7 percent on Thursday following the ECB’s policy meeting. Taking the wind out of euro bulls’ sails, the ECB said it would stay on course to end its 2.6 trillion euro stimulus program this year and keep rates at a record low level through the summer of 2019.
The euro had advanced earlier on Thursday in relief after the United States and the European Union agreed to begin talks to lower tariffs, soothing trade concerns.
Uncertainty before the Bank of Japan’s two-day policy meeting beginning on Monday capped the dollar versus the yen. The possibility that the BOJ may tweak its policy has dominated investors’ attention following reports last week it was looking to make its massive stimulus program more sustainable.
The U.S. currency was 0.3 percent lower at 110.965 yen , unable to hold gains after rising briefly to 111.25.
The pound was flat at $1.3123. It had dropped 0.6 percent overnight as a stronger dollar and growing uncertainty over Brexit negotiations offset the positive impact of bets on a Bank of England interest rate rise next week.
The Australian dollar was 0.2 percent higher at $0.7392, recovering a bit of ground after the previous day’s tumble.