US dollar firms, on track for weekly gains; G20 meeting in focus

[TOKYO] The US dollar rose on Friday, staying on track for weekly gains as investors awaited the outcome of a Group of 20 meeting in Washington whose agenda is likely to feature currency policies.

The perceived safe-haven yen dipped as risk sentiment improved after a spate of Chinese economic data pointed to signs the slowdown in the world's second largest economy may be bottoming out. Official comments on the yen's recent appreciation also quelled buying interest.

The US dollar index, which tracks the greenback against a basket of rival currencies, added about 0.1 per cent to 94.948, up about 0.8 per cent for the week.

The euro edged down about 0.1 per cent to US$1.1261 from a six-month high of US$1.1465 touched on Tuesday, set to shed about 1.3 per cent for the week.

Against the yen, the euro added about 0.2 per cent to 123.47, up 0.2 per cent for the week.

The US dollar also tacked on 0.2 per cent against its Japanese counterpart to stand at 109.65 yen, on track to gain about 1.5 per cent for the week and moving away from this week's more than 17-month nadir of 107.63.

Japanese importers were buying US dollars, market participants said, as Friday was a "gotobi" date - a multiple of five - on which books are traditionally settled.

"Today is 'gotobi', so it's natural for the dollar to rise a little bit," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

Comments from Japanese officials also undermined the yen. Japan's finance minister Taro Aso said on Thursday in Washington ahead of the G20 meeting that he had expressed deep concerns to US Treasury Secretary Jack Lew over one-sided currency moves.

Bank of Japan governor Haruhiko Kuroda also said in Washington that the yen's "excessive" rises have been corrected somewhat in the past few days.

While it is the Ministry of Finance, not the central bank, that determines Japan's currency policy, Mr Kuroda's remarks were notable in that it was the first time he described the yen's appreciation as "excessive".

Commenting on a strong earthquake that shook Kumamoto, southern Japan, late on Thursday, Mr Kuroda said the BOJ was working closely with other authorities to avoid any disruption to banking operations. There has been no report of disruption to fund settlement systems so far, he said.

The US dollar shrugged off US inflation data overnight that might make the Fed more cautious about interest rate hikes. US consumer prices rose less than expected in March and underlying inflation slowed. The consumer price index gained just 0.1 per cent last month, which offset an upbeat labour market report that showed a drop in US jobless claims.

The smaller-than-expected rise in prices last month affirmed Federal Reserve Chair Janet Yellen's recent warnings about the pace of US growth and inflation. After their March meeting, Fed policy makers on average halved their outlook on the number of rate increases this year to two from four.

Sterling was nearly flat at US$1.4151, above its overnight low of US$1.4091 plumbed after Bank of England policymakers voted unanimously to keep interest rates at a record low of 0.5 per cent.

China's yuan eased against the US dollar on Friday after the central bank fixed the softest midpoint this month, but the market shrugged off the slowest Chinese quarterly economic growth since 2009.

While China's economy grew at its slowest pace in seven years in the first quarter, indicators from the country's consumer, investment and factory sectors reinforced previous signs that the economy may be finding traction.

The data buoyed the Australian dollar, as China is Australia's top export market. The Aussie rose about 0.2 per cent to US$0.7711, within sight of a 10-month peak of US$0.7737 scaled on Thursday.

REUTERS