The dollar bumped down from its overnight highs in early Asian trade on Friday, on track for weekly losses in a week marked by continuing uncertainty about US monetary policy, while the euro firmed after the European Central Bank stood pat.
The dollar index, which tracks the greenback against a basket of six major rival currencies, was down 0.1 per cent at 94.920, poised to slip 1 per cent for the week. On Thursday, it plumbed a two-week low of 94.465, before rebounding after crude oil inventory data.
Against its Japanese counterpart, the dollar edged down 0.2 per cent to 102.25 yen, down 1.7 per cent for the week.
The dollar touched its session highs on Thursday after a drop in crude oil inventories. Subsequently higher spot oil prices raised US inflation expectations, which led some investors to speculate that the Federal Reserve could hike interest rates sooner rather than later despite a recent spate of disappointing economic data.
“The market was short dollars ahead of the weekend, and it was a good excuse for short-term guys to buy it back,” said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.
“But I think Japanese commercial orders emerge whenever the dollar/yen gets down to the 101 level,” he said.
A disappointing US non-farm payrolls report a week ago and a weaker-than-expected service sector survey on Tuesday led some investors to trim bets that the Fed would be raising rates as early as this month, despite a chorus of Fed officials signalling that the time to hike was approaching.
The euro edged up 0.1 per cent in early Asian trade to $1.1265, up 1 per cent for the week and moving back toward a two-week high of $1.1328 hit overnight, after the ECB left interest rates unchanged.
The ECB kept the door open to more stimulus but gave no explicit hints about its next move, and ECB head Mario Draghi said that further expanding its asset-purchase program had not even come up for discussion.
“Draghi appeared to be taking a page from the footballers by going on the offense as reporters' questions put him on the defensive," wrote Marc Chandler, global head of currency strategy at Brown Brothers Harriman.
Draghi “vigorously defended the combination of orthodox and unorthodox policies, claiming they are effective,” Chandler said.
Sterling was steady on the day at $1.3298, on track for a slight weekly gain, but retreating from a seven-week peak of $1.3445 scaled on Tuesday and pressured by hawkish comments from Bank of England Governor Mark Carney.
Carney reiterated to lawmakers his view that the central bank stood ready to take “whatever action is needed” to help the economy weather the effects of the UK’s June vote to exit the European Union.