The dollar rose against most major currencies on Friday, clawing off a one-year low against the euro as waning risk appetite cut demand for higher-yielding currencies, giving the bruised greenback some respite. The dollar has retreated broadly since March as investors shifted into riskier assets due to increasing signs the global economy is on the mend, and it extended its losses this week as equities and commodities rallied.
The US currency gained some reprieve on Friday as global equities fell and investors trimmed their positions ahead of holidays in Japan and Singapore next week, although the trend for broad dollar weakness was seen as likely to persist. "It's a risk-driven move for now. Overnight equities didn't perform as well. That is obviously weighing on markets for now. It remains to be seen whether that is sustained," said Geoffrey Yu, currency strategist at UBS in London.
The euro dipped 0.2 percent from late US trading on Thursday to $1.4705 by 1126 GMT. It hit a one-year high of $1.4768 on trading platform EBS on Thursday, and has risen more than 2.5 percent so far this month. The dollar index, which measures the dollar's value against a basket of six major currencies, rose 0.3 percent to 76.455, having bounced off Thursday's one-year low of 76.010.
"We've obviously had a fairly big move. There's not much in terms of news or catalyst to drive the market further ... It's just time for a period of consolidation after some big moves," said Derek Halpenny, European head of currency research at Bank of Tokyo Mitsubishi UFJ in London.
Data showing German August producer prices rose by 0.5 percent month-on-month, beating forecasts for a 0.2 percent rise, had little effect on the market. Comments by Russian Prime Minister Vladimir Putin that there was no threat to the United States from many reserve currencies also had little immediate effect.
Against the yen, the dollar rose as high as 91.47 yen according to Reuters data, after Japanese Finance Minister Hirohisa Fujii said he did not want to be perceived as backing a strong yen. It was last up 0.3 percent at 91.36 yen, having rebounded from a seven-month low of 90.12 yen hit on Wednesday.
Sterling hit a four-month low against the euro of 90.00 pence on news the UK had set tougher-than-expected conditions to the potential exit of Lloyd's Bank from a state-run scheme to protect its assets. Britain's Lloyds Banking Group said on Friday it was weighing alternatives to the scheme to insure it against credit losses. Sterling also slumped 0.5 percent to $1.6348. The Australian dollar fell 0.4 percent to $0.8683, down from a 13-month high of $0.8776 hit on Thursday. The New Zealand dollar was little changed around $0.7093, off a 13-month high of $0.7159 hit on Thursday.