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US dollar weakens vs yen, but outlook stays positive on Fed hike view


[NEW YORK] The US dollar fell for the first time in five days against the yen on Thursday, as investors consolidated recent gains, with concerns related to the fallout of US President Donald Trump's unexpected dismissal of Federal Bureau of Investigation chief James Comey also undermining the currency.

"We do need impetus from new drivers because the day-to-day stuff we track shows dollar/yen has been overbought," said Mark McCormick, North American head of FX strategy, at TD Securities in Toronto, adding that the US dollar's move could be due to position-squaring.

Still, the outlook for the greenback is bright, especially after upbeat US data on Thursday solidified expectations of an interest-rate hike by the Federal Reserve next month.

Data showed US initial jobless claims unexpectedly fell last week, while producer prices rebounded strongly in April.

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"Although March showed a series of lackluster economic data points out of the US, April has appeared to show a rebound," said James Chen, head of research at in Bedminster, New Jersey, adding that recent reports support a potential Fed hike in June.

According to Macroeconomic Advisers, the US economy is tracking gross domestic product growth of 3.9 per cent in the second quarter following Thursday's data, while rate futures priced in an 85 per cent chance the Fed will tighten policy again next month, according to the CME's FedWatch.

The firing of Mr Comey still weighs on the currency market, however, which could curb the US dollar's upside against the yen, analysts said.

Days before his sacking, Mr Comey told lawmakers he had sought more resources for his agency's probe into possible collusion between the presidential campaign of Donald Trump and Russia to sway the 2016 US election.

Sterling, meanwhile, hit a one-week low against the US dollar after the Bank of England's inflation report showed rates are unlikely to rise within the next two years. It was last down 0.5 per cent at US$1.2880.

The BOE's Monetary Policy Committee also voted seven to one in favour of keeping interest rates on hold this month.

In late trading, the US dollar fell 0.4 per cent against the safe-haven yen to 113.87 yen. Against the Swiss franc, another safe haven, the US dollar fell 0.2 per cent to 1.0073 francs.

The US dollar index was down 0.1 per cent at 99.625.

The New Zealand dollar also fell, sliding to an almost one-year low after the Reserve Bank of New Zealand stuck to a neutral bias on policy, warning investors they were reading the outlook wrong and expressing approval of the currency's declines this year.