US dollar slips as recovery loses steam; yen rises

[NEW YORK] The dollar fell against a basket of major currencies on Thursday, as its rally from a three-year low last week ran out of steam, and the yen soared against the greenback as heightened volatility led investors to favor the Japanese currency.

The dollar index, which measures the greenback against a basket of six major currencies, was down 0.31 per cent at 89.724. Through Wednesday, the index gained nearly 2 per cent since hitting a three-year low of 88.253 on Friday.

"The dollar has firmed up over the last week against basically all the currencies. And then we had another push yesterday," said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California.

The index finished 0.3 per cent higher on Wednesday after minutes of the Federal Reserve's January meeting showed policymakers were more confident of the need to keep raising interest rates.

"You could argue that a lot of the good news is out there and it's not a bad time to take the opportunity from the minutes to reposition yourself," said Trang.

A slight pullback in US Treasury yields on Thursday may have also weighed on the dollar, Vassili Serebriakov, currency strategist at Credit Agricole in New York, said.

Benchmark 10-year notes were up 4/32 in price to yield 2.926 per cent, after rising to a four-year high of 2.957 per cent on Wednesday.

The dollar slipped 1.04 per cent against the yen to 106.64 yen, as increased volatility across markets sent traders looking for a safe haven.

Stocks, bonds and currency markets have experienced a pickup in volatility over the last few weeks.

The yen tends to benefit during times of heightened volatility as Japan is the world's biggest creditor nation and there is an assumption that Japanese investors will repatriate funds should a crisis materialize.

The euro was 0.42 per cent higher against the greenback at US$1.2333.

European Central Bank policymakers meeting last month felt it was too early to change their communication stance to signal a normalization of policy, even if confidence was growing that inflation would finally rise back to target, minutes published on Thursday showed.

Sterling rose from a one-week low helped by the weaker dollar although renewed concerns over the state of play in Brexit negotiations checked the British currency's gains. Sterling was up 0.29 per cent against the dollar.

REUTERS