The dollar steadied on Friday after upbeat US economic figures and a dramatic sell-off in the gold market helped the currency recover from a battering on expectations that US interest rates will soon stop rising.
The dollar rose more than half a percent against the euro and the pound on Thursday, rebounding from seven-month lows as investors also pared bets against the US currency on the view that the selling had been overdone, traders said. The dollar, accustomed to moving in the opposite direction to prices of save-haven metals, was lifted by a wave of profit-taking on gold and silver, which hit 25- and 23-year highs.
Gold was dumped again on Friday after its biggest one-day fall in over six years, while silver extended losses after its largest one-day drop in nearly 20 years.
The dollar also garnered some support from a key US regional business survey that showed an improvement in factory activity, as well as from a drop in weekly jobless claims. But the market was cautious about pushing the dollar too high after the Federal Reserve signaled this week that its run of raising short-term rates may be nearly over, while the European Central Bank is seen boosting rates at upcoming policy meetings.
"We are going to be nervous after the May Fed meeting because we are not sure what's going to come next," said the chief trader at a European investment bank in Tokyo.
The Fed is widely expected to bump up rates to 5 percent at its next policy meeting in May and then take a break from its two-year run of credit tightening that helped push the dollar up 15 percent vs the euro and the yen in 2005.
With the market in consolidation mode and no major data due until next week, the dollar would likely move in tight ranges during Tokyo trade, dealers said.
The euro was down slightly at $1.2305, off the seven-month high of $1.2395 touched on Wednesday.
The dollar was flat at 117.55 yen and was seen capped around 118 yen by orders from Japanese exporters.
Traders said the dollar stabilised against the yen due to buying interest from investors and importers above 116 yen, with support also from active mutual funds that focus on foreign assets.
Sterling was little changed at $1.7785, well off the seven-month peak of $1.7937 after a bruising from weaker-than-expected British inflation figures. The single European currency was at 144.70 yen, off the record high of 145.51 yen marked in the previous session.
Traders said the yen, often treated as a proxy currency for the Chinese yuan, was bought in cross trades after Chinese President gave US President a general assurance he was working to make the yuan more "flexible".