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[TOKYO] The US dollar firmed a little but languished close to 17-month lows against the yen on Friday, with the Japanese currency poised for weekly gains against its major counterparts despite verbal warnings from Japanese officials.
Underpinning the greenback, a less cautious tone from Federal Reserve Chair Janet Yellen reminded investors that US interest rate hikes are likely still in the cards this year, and Japanese finance minister Taro Aso let them know direct invention is also possible.
Speaking at a panel with former chiefs of the US central bank, Ms Yellen said late on Thursday that the labour market was "close" to full strength and that inflation was currently held back by temporary factors. She said the economy is on a solid course and still on track to warrant further interest rate hikes.
But the US dollar's big picture still shows expectations of waning strength. A Reuters poll of strategists released on Thursday showed the US dollar rally that began in mid-2014 has nearly run its course and will only gain slightly over the coming year, with respondents saying risks to their forecasts are tilted more to the downside.
Japanese finance minister Taro Aso said early on Friday that rapid foreign exchange moves were "undesirable", that the current yen moves were "one-sided", and that Japan would takes steps as needed.
Mr Aso's words helped the US dollar gain about 0.5 per cent to 108.73 yen after dropping as low as 107.67 overnight, its weakest since Oct 2014. But it was still on track to lose 2.7 per cent for the week.
The euro added about 0.3 per cent against the yen to 123.54 yen but was poised to shed around 2.8 per cent for the week.
While the odds of direct yen-selling foreign exchange intervention have "slightly risen", strategists at ING said they remain some distance away from any material action ahead of a G7 summit that Japan is hosting in May, unless the US dollar were to sharply drop into the 100-105 area.
"More aggressive jawboning will be the near-term option to maintain USD/JPY above 105," they said in a note to clients.
The euro edged down about 0.1 per cent against the US dollar to US$1.1364 after rising as high as US$1.1454 overnight, its highest since October. It was on track for a slight weekly loss.
The dollar index, which tracks the US unit against a basket of six rival currencies, was up about 0.2 per cent at 94.619, poised for a flat weekly performance.