Dollar soft as hopes for mid-year US rate hike fade

27/04/2015 07:25 AST

The yen extended its gains against the dollar on Monday after a batch of weak US data fuelled more doubts about a mid-year interest rate hike.

In Tokyo the greenback slipped to 118.89 yen, from 118.99 yen in New York and well off the 119.56 yen earlier Friday in Asia.

The euro was slightly weaker at $1.0862 and 129.14 yen against $1.0873 and 129.38 yen in US trade, as investors look for any signs of progress in Greece`s bailout talks.

On Friday, a US government report on durable goods orders raised new questions about the Federal Reserve`s planned interest rate increase.

While the headline number rose 4.0 percent in March, that was driven by jumps in civilian and military aircraft as well as autos; without them orders fell 0.2 percent.

The Fed`s policy committee meets Tuesday and Wednesday. The US central bank has said any increase in interest rates, which some expect as early as June, would be data-dependent.

Also this week, the Bank of Japan (BoJ) kicks off a one-day meeting but policymakers are expected to stand pat on fresh measures, despite signs of weakness in the world`s number three economy.

"Speculative positions show waning appetite for shorting the yen -- the probability of further BoJ easing this week is low," Toshiya Yamauchi, a senior analyst in Tokyo at Ueda Harlow, wrote in a client note.

"Expectations for firm first-quarter US growth are fading and the Fed may soften its tone on economic activity, raising the likelihood that rates will be hiked later in the year. The dollar will face downward pressure for a while."

Eurozone finance ministers ended a heated meeting Friday in the Latvian capital Riga without a breakthrough toward unlocking 7.2 billion euros in bailout cash for Greece to help it avert a default.

Officials were angered by Greece`s lack of progress in coming up with reforms required for the payment.

Athens said its leaders will resume talks with creditors Monday after Prime Minister Alexis Tsipras spoke by phone to German Chancellor Angela Merkel.

Despite the apparent lack of progress, the single currency has been winning support as foreign investors buy euro-denominated stocks after the European Central Bank embarked on a vast monetary easing programme.

"Europe is surprising on the upside," said Robert McAdie, head of research and strategy at BNP Paribas.

"If European growth continues to pick up, you`ll see the inflows going into Europe -- like portfolio inflows -- which will support the euro."

AFP