The dollar fell against the yen on Friday but was flat versus the euro in pre-holiday trading as investors continued to take profits on steep gains racked up this year, ignoring a mixed batch of US data.
In mid-afternoon trading, the dollar was down 0.4 percent from late Thursday at 116.23 yen. The yen has lost about 13 percent against the dollar since the beginning of the year.
"Today's driver have been mainly position-squaring and relative yen strength," said John McCarthy, director of foreign exchange at ING Capital Markets in New York.
"People have been short yen for a long time and they've taken some of that off the table. There is nothing really much going since we have very thin markets," he added.
Short positions are effectively bets a currency will weaken.
Markets overall ignored Friday's mixed US data. US new home sales fell 11.3 percent in November to a 1.245 million unit annual rate, much weaker than analysts' forecast of a 1.305 million rate. But this was offset by a fairly positive US durable goods report and a robust University of Michigan final consumer sentiment index for December, which came in at 91.5, above economists' median forecast of 89.0.
"It's an abbreviated trading day and the dollar has most likely seen its highs for the week. We will most likely see some dollar selling as positions are squared up for the remainder of the day," said Brian Dolan, director of foreign exchange research at Gain Capital in Warren, New Jersey.
The euro traded flat at $1.1864 and was down 0.4 percent against the yen at 137.89 yen. Against the Swiss franc, the dollar was little changed at 1.3125 francs.
Sterling slipped 0.2 percent to $1.7336. The pound is heading for its largest weekly decline against the dollar since July, with investors pricing in a more dovish outlook for UK interest rates.
Analysts said that interest rate futures after the US new home sales report signalled a lower likelihood the Federal Reserve would continue raising short-term US interest rates after January.
The dollar has rallied all year, mainly because of Fed rate increases, which have burnished the appeal of dollar-denominated deposits to foreign investors.
The Federal Reserve indicated after its last policy meeting on December 13 that it would closely assess incoming economic data in determining the future course of official interest rates.
The US dollar posted gains against the Australian and New Zealand currencies as investors unwound interest rate-related bets in quiet market conditions. Both currencies came off their lows as trading wound down.
Earlier, traders shrugged off stronger-than-expected data on November US durable goods orders since the underlying numbers painted a less rosy picture for the economy. The data had little impact on the interest rate outlook, analysts said.
"The (durable goods) headline number was much higher than anticipated. However, if you strip out the transport component, the number was a little soft. This number is notoriously volatile," said Alex Beuzelin, forex market analyst with Ruesch International in Washington, DC.
"At the end of the day, this is not going to change the view that the US economy is in good shape. Not going to provide any much insight as to how much the Fed has to go. So it hasn't had much of an impact on the dollar," he said.
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