Dollar subdued in post-holiday trade, euro under pressure

The dollar, euro and yen stuck to familiar ground on Friday in thin trade after the US Thanksgiving Day holiday.

The dollar index stood at 99.844, up slightly and not far from an 8-1/2 month peak of 100.170 scaled on Wednesday. For the week, it was up about 0.2 per cent.

Against the yen, the dollar was nearly flat at 122.60, remaining in consolidation mode after reaching a three-month high of 123.77 on November 18, and up from this week's low of 122.26.

Japanese data on Friday painted a mixed picture, though some market watchers were optimistic overall.

Japan's core consumer prices fell for the third straight month, mostly due to the effect of falling energy costs, and household spending slumped in October. But the jobless rate fell to 3.1 per cent, its lowest since July 1995.

"Forex doesn't respond much to Japanese releases, but the overall sentiment is quite solid. There's a base forming," said Bart Wakabayashi, head of foreign exchange for State Street Global Markets in Tokyo.

"Household spending was bad, which is always a concern," he said.

Japanese Economics Minister Akira Amari told reporters on Friday that the unexpected fall in household spending shows that some consumers still lack confidence in the economy.

Amari said the Government will maintain its target of halving the primary budget deficit in fiscal 2015 when it compiles an extra budget for economic stimulus.

Japanese Finance Minister Taro Aso said on Friday that the cabinet was instructed by Prime Minister Shinzo Abe to compile an extra budget for the current fiscal year.

Against the yen, the euro edged up slightly to 130.09, but was still not far off a 7-month low of 129.77 plumbed on Wednesday.

The euro managed to hold above $1.0600 and last stood at $1.0610, but it remained within reach of a 7-1/2 month trough of $1.0565 set on Wednesday.

The prospect of more easing from the European Central Bank at next week's policy review has been keeping the euro under pressure. In contrast to the ECB, the Federal Reserve is widely expected to hike US interest rates in December.

Market participants expected trading would remain subdued for the rest of the session with an early post-Thanksgiving close for US markets on Friday extending the holiday lull.

"Lacking impetus from offshore markets and as our North American cousins continue to make inroads into the 46 million turkeys they typically consume each Thanksgiving, it promises to be a slow Asia-Pacific Friday," said Ray Attrill, global co-head of FX strategy at National Australia Bank.

Next week promises to be more eventful, with the ECB policy review on Thursday to take centre stage. The Reserve Bank of Australia and Bank of Canada also hold their respective policy meetings in the week ahead.

The International Monetary Fund (IMF) is expected to announce on Monday whether it will include the yuan, also known as the renminbi, in its $280 billion basket of currency reserves, known officially as Special Drawing Rights, or SDR. Its inclusion in the basket would mark a major diplomatic victory for Beijing's campaign to internationalise the currency.

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