Dollar steadies

The dollar steadied against the euro on Wednesday after falling on a report suggesting US inflation was well-contained, which backed the view that the Federal Reserve could cut interest rates this year. The euro extended gains to a fresh record high against the yen, supported by expectations that euro zone interest rates are set to rise further after robust first-quarter growth data the previous session.
The yen stayed on the backfoot against major currencies despite mounting expectations for the Bank of Japan to lift rates to 0.75 percent in the third-quarter from the currency 0.5 percent, with the yen's yield disadvantage seen staying large.
The market was quiet as traders awaited Japanese economic growth data for the first quarter due on Thursday and a news conference by BoJ Governor Toshihiko Fukui after a policy board meeting ending the same day for clues on the rate outlook.
"Traders are cautious ahead of Japanese events tomorrow, but not too cautious because strong GDP data alone is less likely to alter expectations for a possible BoJ rate hike in the third quarter," said Haruhisa Takagi, head of foreign exchange spot trading at Sumitomo Mitsui Bank.
The dollar was little moved at 120.27 yen pulling back from a three-month high of 120.59 yen struck the previous session. The euro was a bit higher at $1.3606, after rising back towards an all-time high of $1.3683 struck in late April.
Traders said the euro got a boost on Tuesday from European investors repatriating their share of the US Treasury's quarterly payout in coupons on Tuesday.
Japanese gross domestic product data on Thursday is expected to show a 0.7 percent rise in January-March from the previous quarter in, or an annualised 2.7 percent, according to the median forecast in a Reuters survey. Analysts said cooling inflation supports the global stock market, encouraging investors to stick to risky positions such as carry trades, in which low-yielding currencies such as the yen are borrowed to fund investments in higher-yielding assets.
The Fed has repeated that price pressures remains a greater risk than a slowdown in economic growth. But investors believe slowing core inflation could make the Fed comfortable about mulling a cut in interest rates to help the economy grow.
The euro strengthened to 163.78 yen, the highest since the single currency was first launched in 1999. The low-yielding yen has touched a 15-year trough against the Canadian dollar and a 17-year low against the New Zealand dollar this week.