The dollar posted solid gains against the yen on Friday in technically-driven trading and eked out an advance against the euro amid end-of-quarter book squaring and a better-than-expected manufacturing report from the Chicago area.
The Canadian dollar rose to almost a 14-year high against the greenback as momentum players bet on steady economic growth, more interest rate hikes and further investment in Canada's oil patch.
Dollar/yen rose to a two-month high around 113.68 yen, as the currency pushed through a series of stop-loss levels forcing investors to buy dollars to reduce their losses, traders said.
"It's a technically-driven market with dollar strength rather than yen weakness," said Bill Hoerter, chief dealer at Alaron Foreign Exchange in Chicago. "But I would be surprised if it breaks 114 yen."
Late afternoon in New York the dollar held gains, trading at 113.47 yen, up 0.4 percent from late Thursday. One trader said the Japanese unit was also getting a boost from Indonesia's fuel and gas hikes as people sold yen as a proxy for the Indonesian rupiah.
But the dollar's gain against the yen was almost the only good news for the greenback.
A fall in US August consumer income and spending and a tumble in September consumer confidence muted the dollar's gains against the euro, despite a rise in September Midwest business activity in data published Friday.
The euro traded at $1.2024 according to Reuters data, down 0.1 percent compared with late Thursday. The euro had hit a two-month low of $1.1976 earlier this week.
US consumer spending dropped a larger-than-expected 0.5 percent in August, the biggest fall since November 2001. Consumer sentiment was gloomy as well, with the University of Michigan final consumer sentiment index for September registering at 76.9, below economists' forecasts for 78.0.
The Chicago Purchasing Management Index rose to 60.5 in September from 49.2 in August, well above forecasts for 51.0.
"Chicago PMI came out stronger than expected and we also saw the prices paid index rise," said George Davis, chief foreign exchange technical analyst with RBC Capital Markets in Toronto.
"Given the stronger-than-expected headline number and the rise in the prices paid component, that would reaffirm the measured stance (of rate increases) currently held by the Fed and likely would be supportive for the US dollar over the short run today," Davis said.
The prospect of higher US interest rates tends to boost the appeal of dollar-denominated deposits to foreign investors.
Elsewhere the US currency dropped sharply to 14-year lows against the Canadian currency, around C$1.1589 according to Reuters data. The US dollar was last trading at C$1.1622 against the Canadian currency, down 0.8 percent. The Canadian dollar's surge to 14-year highs "is part of the recent trend," said Shaun Osborne, chief currency strategist at Scotia Capital in Toronto. "Commodities are strong and while the economic numbers this week were not exactly stellar, the BOC (Bank of Canada) is still in a tightening mode," he said.
The economy of oil exporter Canada stands to be a main beneficiary of high crude prices and disruptions to US production and refining capacity caused by recent hurricanes.
Sterling/dollar rose 0.1 percent to $1.7637. Dollar/swiss franc was little changed at 1.2941 francs.
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