By Kevin Buckland
TOKYO, March 3 (Reuters) - The U.S. dollar eased back
from a 2-1/2-month high versus the yen on Friday and weakened
toward its first weekly loss since January against major peers
as traders tried to gauge the path for Federal Reserve policy.
The yen, which is particularly sensitive to U.S.-Japanese
long-term interest rate differentials, threatened to extend a
weekly losing streak to seven weeks, even as it gained strength
on Friday with 10-year U.S. yields retreating from a
nearly four-month high close to 4.1%.
Taking some steam out of the dollar and the breathless
advance in U.S. yields were comments from Atlanta Fed President
Raphael Bostic overnight that "slow and steady is going to be
the appropriate course of action," despite new labour figures
adding to the run of strong data of late.
"For this year, the outlook for USD will continue to depend
critically on whether bonds and equities can rally together (as
appeared to be happening in January) or whether we remain in the
bearish/bearish environment that dominated 2022," RBC
strategists wrote in a client note.
"In turn, this will depend on incoming US data, particularly
inflation data."
The dollar index , which measures the currency against
the yen, euro and four other major peers, eased 0.11% to 104.85,
from as high as 105.36 at the start of the week, which was the
highest level since Jan. 6. Since last Friday, the index has
slipped 0.36%.
Analysts polled by Reuters said recent dollar strength is
temporary, and the currency will weaken over the course of the
year amid an improving global economy and expectations the Fed
will stop hiking interest rates well ahead of the European
Central Bank.
The Bank of Japan (BOJ) is also expected to start to
dismantle extraordinary stimulus measures some time after
Governor Haruhiko Kuroda retires next month.
Tokyo inflation data for February exceeded the BOJ's target
for a ninth month, but the core measure did decelerate from a
42-year high.
The dollar eased 0.15% to 136.575 yen , after
climbing to 137.10 overnight, the highest since Dec. 20. For the
week, the dollar is just slightly above flat, but any gain would
preserve its win streak since mid-January.
The euro rose 0.08% to $1.0606, after climbing off
a nearly two-month low of $1.0533 at the start of the week.
Since last Friday, it is up 0.59%.
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(Reporting by Kevin Buckland; Editing by Christopher Cushing)
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