Yen grinds lower as global stocks rally, dollar holds steady

17/04/2014 07:27 AST

The yen wallowed at one-week lows against the dollar early on Thursday, having eased broadly overnight as a rally in global stocks dented demand for the safe-haven currency.

The dollar bought 102.22 yen after rising 0.3 percent on Wednesday, while the euro reached a two-week high of 141.77 yen before edging back to 141.22 yen.

The yen started its decline in Asia on Wednesday as the Nikkei surged after comments from Japanese Finance Minister Taro Aso were seen as suggesting more stock buying by a major government pension fund.

Investors are now awaiting a speech from Bank of Japan Governor Haruhiko Kuroda, who on Wednesday affirmed the central bank's optimistic view of the economy.

The focus overnight was on Janet Yellen. In her second public speech as Federal Reserve Chair, she stressed the need for accommodative policy citing persistently low inflation and economic slack.

Her dovish remarks somewhat offset promising data that showed the U.S. economy was regaining momentum. U.S. industrial production rose at a faster-than-expected clip in March, while the Fed's Beige Book report showed economic activity picked up in recent weeks.

That left the dollar little changed against a basket of major currencies. The dollar index .DXY last traded at 79.808.

Analysts at BNP Paribas said they remained positive on the dollar's outlook.

"With U.S. data surprise measures bouncing now, the Fed nearly half way through its tapering process, and U.S. yields still near the bottom of their broad ranges, we see upside risks for the USD from current levels," they wrote in a note to clients.

Investors cooled on the euro somewhat after data on Wednesday confirmed that euro zone inflation had slowed to levels not seen since November 2009.

That should keep the pressure on the European Central Bank to act if prices do not rebound.

The euro was at $1.3819, having retreated from Wednesday's high of $1.3851.

Among the best performing currencies was sterling which climbed to its highest in over a month against the euro after upbeat data bolstered expectations the Bank of England may have to tighten earlier than it has signaled.

The euro fell to 82.20 pence, its lowest since early March and was last at 82.25 pence.

Official data showed Britain's unemployment rate fell to a five-year low of 6.9 percent in the three months to February, down from 7.2 percent in the three months to January and below a forecast in a Reuters poll of 7.1 percent.

After a setback on Wednesday, the New Zealand dollar was steadier at $0.8625. It had fallen to its lowest in over a week at $0.8578, stung by a surprisingly soft inflation reading and another fall in dairy prices.

Reuters