Dollar sits near two-year highs

The dollar stood its ground near recent two-year highs against the euro and the yen on Thursday as dealers awaited US trade figures to provide short-term direction for the US currency.
The market was focusing on how much soaring energy prices would widen the US trade deficit in September, with economists in a Reuters poll forecasting a record $61.0 billion, compared with $59.03 billion in August. The data is due at 1330 GMT.
But analysts said even a surprisingly large gap would not derail the dollar's rally this year, since market focus has been on the improving US economic outlook and interest rate hikes, rather than concern on the US ability to attract flows to fund its deficit.
"Given the underlying positive sentiment for the dollar, a weaker than expected trade balance would widely be ignored," Armin Mekelburg, currency strategist at Hypovereinsbank in Munich said.
The preliminary University of Michigan consumer sentiment survey for November is due at 1445 GMT and is forecast to rise to 76.0 from 74.2.
"The consumer confidence figures are going to be good..., so the dollar will rise," HBOS chief currency strategist Steven Pearson said.
By 1218 GMT, the euro was at $1.1775, steady on the day after falling for five straight sessions, while the dollar was flat at 117.60 yen.
US currency markets are likely to thin out on Thursday ahead of the Veterans Day holiday on Friday.
The dollar has gained around 7 yen in the past two months, partly due to Japanese investors' appetite for higher-yielding foreign bonds, which has outweighed steady overseas inflows into the Japanese stock market.
Japanese investors snapped up 713.5 billion yen ($6.07 billion) of foreign debt last week, their largest net buying in a month, data from Japan's Finance Ministry showed on Thursday.
The yen momentarily dipped to the day's low of around 117.80 per dollar after data showed Japanese machinery orders fell 10 percent in September from the previous month, worse than expectations for a 7 percent fall in the volatile indicator.
The dollar's widening yield advantage has helped to lift it to two-year highs of 118.38 yen and beyond $1.1710 per euro this week.
But Japan's top financial diplomat Hiroshi Watanabe said on Thursday that there was no need to take immediate action regarding the recent decline in the yen against the dollar.
Sterling held steady after the Bank of England left interest rates unchanged as expected at 4.5 percent for the third month running.
The pound held at $1.7488, up 0.3 percent on the day and 67.33 pence per euro, up 0.2 percent on the day.