The dollar slipped against the yen on Friday as a late afternoon rally in Japanese stocks injected a burst of energy into a market that had been quietly anticipating upcoming comments on recent high oil prices.
The US currency stumbled to around 112.20 yen in late Tokyo trading dragged down by a nearly two-percent rise in the Nikkei stock average that lifted the bourse over the 11,000 level.
For the most part, however, the market was waiting for the outcomes of both a meeting of Group of Seven (G7) finance ministers in New York and an informal meeting of the Organisation of the Petroleum Exporting Countries (OPEC) in Amsterdam on the weekend. "There's quite a lot of focus on OPEC in particular, because there's a lot of focus on interest rates and oil in the context of the G7," said Naomi Fink, senior currency analyst at BNP Paribas.
Oil is becoming increasingly important in the currency market, as the dollar has come under pressure from prices that have remained close to record highs of over $40 a barrel in recent days.
The soaring prices have also caused worries in US stock markets as they would likely hurt corporate earnings, as well as consumer spending and sentiment.
A slow-down in US economic recovery could be the result, traders say.
"High oil prices are seen as a factor that would slow down the pace of US monetary tightening," said Yoshihiro Nomura, forex section manager at Trust & Custody Services Bank in Tokyo.
Japanese Finance Minister Sadakazu Tanigaki said on Friday that oil and interest rates may be discussed at the G7 meeting, although he added they would not be a major theme.
The dollar was around 0.57 percent softer from overnight levels around 112.70 yen.
It was also slightly weaker against the euro at $1.2011 compared with $1.1965 in New York.
The yen gained marginally on the single currency, fetching 134.72
Sterling was trading at $1.7811 after briefly dipping to about 1.7735 on a rumour of an attack on London's underground rail system.
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