TOKYO: The dollar took a breather in Asia on Friday after hitting a near two-year high against the euro in New York as the US economy shows further signs of strength.
The single European currency was trading at $1.2749 in Tokyo Friday, up from a low of $1.2697 in US trade, which was its weakest level since November 2012. The euro also fetched at 138.86 yen against 138.62 yen.
The greenback bought 108.92 yen, up from 108.73 yen in New York but well off the 109.30 yen touched earlier Thursday in Tokyo.
Another batch of generally good news out of the United States fed speculation that the Federal Reserve will likely hike interest rates sooner than anticipated.
Jobless claims rose, but held below 300,000, and the four-week moving average continued to fall, a fresh confirmation of the improving trend in the jobs market.
Also, while durable goods orders were dragged by volatile aircraft orders in August the overall growth trend was still strong.
Traders are now eyeing US jobs data next Friday and a news conference by Bank of Japan governor Haruhiko Kuroda on October 7.
The dollar could still break 110 yen, said Osamu Takashima, chief FX strategist at Citigroup Global Markets Japan, because of potential yen-selling by short-term players.
Any announcement that Japan’s $1.2 trillion Government Pension Investment Fund will reallocate its portfolio would put a rocket under the coupling.
A move by GPIF to shift into foreign currency would give a lead to numerous pension funds and may result in yen selling by overseas hedge funds, said Nomura Securities chief strategist Yunosuke Ikeda.
Dealers seemed little moved by Japanese data showing a slower-than-expected 3.1 percent year-on-year rise in August inflation.
Excluding the impact of a sales tax hike in April, the rise in core consumer prices was 1.1 percent, well short of the Bank’s ambitious 2.0 percent target for next year.
Many economists say the central bank may need to announce further monetary easing to mitigate the long-term impact of the tax hike on consumption.