By Hideyuki Sano
TOKYO (Reuters) – The British pound flirted with two-week lows against the dollar on Friday following comments from the Bank of England chief and soft UK retail sales data, while the yen eased as risk sentiment was on the mend.
Still, uncertainties on issues ranging from U.S. trade policies to North Korea and Syria kept many investors on hold, and the euro/dollar and the dollar/yen could see one of their narrowest weekly range in months.
Bank of England Governor Mark Carney dampened widespread expectations for an interest rate hike in May on Thursday, pointing out there were also “other meetings” this year.
Disappointing UK retail sales released earlier on Thursday also raised some doubts about the outlook for UK rate hikes.
The British pound fell to a two-week low of $1.4069
Against the euro, it hit a three-week low of 0.87725 pound per euro
The euro was little changed against the dollar at $1.2338
This week it has moved in a range of only 89 pips, or 0.89 cent, between $1.2414 and $1.2325, which would match the trading range in the holiday shortened first week of January, which was the tightest since August 2014.
The euro changed hands at 132.64 yen
“I think the excessive nervousness about a trade war and other political risks has eased a tad. Still, with G20 finance minister meeting planned this weekend, market players are cautious,” said Kyosuke Suzuki, director of forex at Societe Generale in Tokyo.
The dollar firmed to 107.63 yen
“For weeks, we have had a negative news one after another — trade wars, Syria, Russia, Facebook, Uber, Tesla, you name it. We haven’t been in an environment where investors can take risk,” said Koichi Takamatsu, chief of forex trading at Nomura Securities.
“But even after all that, the dollar didn’t fall further. And people who held back from buying dollars started to buy from yesterday,” he said
The dollar/yen pair has been also stuck in a narrow 0.845 yen range so far this week, which would be the tightest since the holiday-shortened last week of 2015.
Investors are expecting range-bound trade to continue in the yen, and the euro.
Implied volatilities on dollar/yen options
Against the yen, the dollar has been marginally supported by a rise in U.S. bond yields.
The 10-year U.S. Treasuries yield hit a one-month high of 2.934 percent
The inflation expectations calculated by the gap between yields on inflation-linked bonds
Elsewhere, the New Zealand dollar fell 0.4 percent to $0.7240
The Swiss franc hit its lowest level in more than three years, sliding below 1.20 per euro
The franc is in part weighed by expectations that the Swiss National Bank (SNB) will stick to loose monetary policy even as the ECB looks to wind down its stimulus.
(Editing by Sam Holmes and Kim Coghill)