The dollar weakened on Friday, crawling towards a seven-month trough against the yen after a series of US data this week underscored a slackening in the economy's recovery. Market players closely watched whether the dollar could hold above its July 1 low of 86.96, its lowest since early December, as a fall below that level could boost the possibility of the greenback dropping to 84.82 yen, a 14-year low reached last November.
Last December the Bank of Japan called an emergency meeting soon after the dollar slid to the 14-year tough, and decided to pump 10 trillion yen ($114.5 billion) in three-month funds into the banking system. Market players said there was talk of stop-loss dollar offers at levels below 87.00 yen.
The dollar slid 0.5 percent to 87.02 yen after falling as low as 86.97 yen. Some speculative players who are betting further losses in the greenback would be limited against the yen bought back dollars below 87.00 yen, traders said. The euro hovered near a two-month peak of $1.2955 hit on trading platform EBS on Thursday, when it jumped 1.6 percent against the greenback.
The euro dipped 0.2 percent to $1.2916, giving back some of its 1.6 percent gain from Thursday, when it scaled a two-month high of $1.2955 on trading platform EBS. Although technical charts suggest the euro is still trending higher, there were some indications that its rise may lose steam for now. A senior trader for a major Japanese bank said many euro option barriers were likely to lie at levels near $1.3000, adding that the pace of the euro's rise may slow in the near-term.
The euro's 14-day relative strength index (RSI) rose above 70 on Thursday, showing that the euro had entered overbought territory. That was also the highest since September 2009. The euro's RSI was near 68 on Friday, still near overbought territory. The New Zealand dollar dropped after inflation data was weaker than expectations. The kiwi fell 1 percent on the day to $0.7201, having stood at around $0.7270 before the data.
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