FOREX-Dollar steadies after losses on soft jobs data, yen slips

The dollar steadied on Friday after losing ground overnight on the back of U.S. data showing further signs of a cooling labour market, while the yen dipped as investors pushed back after suspected intervention last week.

The dollar steadied on Friday after losing ground overnight on the back of U.S. data showing further signs of a cooling labour market, while the yen dipped as investors pushed back after suspected intervention last week. Against the yen, the dollar was trading at 155.73 yen , up 0.17% but unable to reclaim Thursday's 155.95 high.

The euro stood at $1.0783, almost flat after a 0.3% gain overnight, while the British pound inched higher after data showed the UK economy beat expectations in the first quarter. That meant the dollar index, which measures the greenback against its major peers, was little changed at 105.26 after falling 0.3% on Thursday.

The retreat followed data showing a jump in initial claims for U.S. state unemployment benefits. Coming on top of last week's weak payrolls report, it further encouraged investors that the Federal Reserve will start lowering interest rates in the third or fourth quarter and spurred buying of stocks and bonds, pulling down yields. Alvin Tan, head of Asia FX strategy at RBC Capital Markets, said the dollar was unlikely to fall too far, however, given that high U.S. interest rates still make U.S. bonds attractive.

"They're still offering the highest rates in the G10 space. So that, in tandem with low volatility, suggests the U.S. dollar will remain supported," he said. "It's setting up to be more range-trading unless we see some kind of a shock." The yen was on track to lose around 1.7% against the dollar for the week, as traders continued to test the resolve of Japanese authorities to support the currency.

Market players estimate Tokyo spent some $60 billion last week to bring the yen back to its lowest since 1990 at around 160. Japan's Finance Minister Shunichi Suzuki repeated his line on the government's intent to intervene if needed, at a regular post-cabinet meeting news conference on Friday. "If indeed we go back to close to 160 then the risk of intervention does rise," said RBC's Tan. "Verbal intervention has been increasing in the last few days for sure." Investors nudged sterling higher on Friday after data showed the UK economy grew 0.6%, more than expected, in the first quarter of the year, exiting a mild recession.

The pound was last up 0.1% at $1.2532, having traded at $1.2516 before the figures. It fell to a two-week low on Thursday after the Bank of England held interest rates but paved the way for a cut in the summer. Traders will be closely watching the April U.S. producer price index and the consumer price index out next week for signs that inflation has resumed its downward trend towards the Fed's 2% target rates.

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