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The dollar eased from a 9-1/2 month high against the yen on Friday, with investors cautious ahead of a looming US jobs report that could set the market’s tone in coming days.
The greenback was poised to end lower against a basket of currencies this week during which it gave up some of its recent robust gains.
The dollar index sagged 0.2 per cent to 100.86, and was down 0.6 per cent for the week.
The dollar index had hit a 13-1/2-year high of 102.05 last week, having rallied as US bond yields surged on expectations of higher fiscal spending and a faster pace of Fed monetary tightening under President-elect Donald Trump.
The greenback fell 0.1 per cent against the yen to 114.02 yen, having slipped to 113.58 yen earlier on Friday.
On Thursday, the dollar had risen to 114.83 yen, recording a gain of 13.5 per cent from its November 9 trough near 101 yen.
The dollar seems to be running into some profit-taking against the yen, said a trader for a Japanese bank, adding that the market sentiment still seems bullish on the greenback.
“The sense I get is that people who have sold (the dollar) on rallies have taken a hit, while bulls are still doing fine,’’ the trader said, adding that market participants are probably looking to buy the dollar on dips.
The next catalyst could come from US jobs data due later on Friday. Economists polled by Reuters expect that US employers added 175,000 jobs in November.
“The dollar could test the 115 yen threshold depending on how the US jobs report turns out,” said Daisuke Karakama,market economist at Mizuho Bank.
The euro inched up 0.1 per cent to $1.0670, having gained 0.9 per cent so far this week.
The focus for the common currency is now on the Italian referendum on Sunday that could reject Prime Minister Matteo Renzi's constitutional reforms, on which he has staked hispolitical future.
His departure could destabilise Italy’s fragile banking system and be taken as another sign of rising anti-establishment sentiment around the world, potentially eroding investor confidence in the currency union.
“It’s been said that markets are already prepared for a ‘no’ vote to some extent. However, that could trigger political uncertainty and delay fiscal reform,” said Minori Uchida, chiefFX analyst for Bank of Tokyo-Mitsubishi UFJ in Tokyo.
“We should brace ourselves for a further euro drop, evenwhen the ‘no’ vote is already taken into account,” Uchida said.
Moves in the euro’s implied volatility against the dollar suggest that market participants are guarding against the risk of sharp swings in the euro in the near term.
The euro’s one-week implied volatility against the dollar has risen for five straight days and climbed to 17.97 per cent on Friday, its highest since the Brexit vote in June.
Sterling held firm after rising on Thursday due to a perceived crack in Britain’s “hard Brexit” line following comments from Brexit minister David Davis.
The pound rose 0.2 per cent to $1.2610, having gained 0.7 per cent on Thursday when it touched a 2-month high of $1.2696.
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