By Satomi Noguchi
TOKYO, June 13 (Reuters) - The dollar dipped from a nearly
four-month high against the yen on Friday as investors booked
profits from this week's rally before a gathering of Group of
Eight finance ministers in Japan this weekend.
The dollar had staged broad gains this week as anti-inflation
talk from Federal Reserve officials and Thursday's surprisingly
strong retail sales figures stoked expectations for interest rate
increases this year.
Traders said the dollar's gains looked a little overstretched
and it may face profit-taking as investors have probably gone too
far in pricing in the possibility of three Fed rate hikes this
year.
"The dollar's rally against the yen looks as if it has run
its course," said Hideki Amikura, a deputy general manager of
forex at Nomura Trust and Banking.
Amikura said the dollar may weaken further if Friday's U.S.
data shows that a rise in consumer prices for May is smaller than
expected and cools some expectations for tighter Fed policy.
But the U.S. currency may be underpinned if U.S. Treasury
Secretary Henry Paulson and other finance ministers attending the
G8 meeting issue dollar-supportive comments, coming soon after a
barrage of verbal support for the battered dollar from
Washington.
Paulson and the other finance ministers will discuss the
global economy and soaring oil and food prices ahead of the G8
leaders' summit in July. []
While currencies are not expected to be a key topic, some
ministers have said they will be discussed.
The euro briefly dipped after French Economy Minister
Christine Lagarde said on arriving in Japan that the recent
strengthening of the dollar was "satisfying" and that currencies
will be discussed, according to media reports. []
The dollar fell 0.2 percent against the yen from late U.S.
trade on Thursday to 107.73 yen <JPY=>, stepping back from a
nearly four-month high of 108.08 yen hit the previous day.
For the week, the dollar is up 3 percent against the yen,
poised for its best weekly gain in four years.
The Bank of Japan kept interest rates steady at 0.5 percent
on Friday, as widely expected. Investors were interested in
hearing BOJ Governor Masaaki Shirakawa's views on global
inflation when he speaks at a post-meeting news conference from
0630 GMT.
The euro was little changed at $1.5449 <EUR=>.
The single currency had been buffeted by comments from
officials that suggested the European Central Bank was not about
to embark on an extended period of monetary tightening.
Market players were also closely watching the outcome of
Ireland's referendum on the European Union reform treaty, with
results expected on Friday.
The rejection of the EU constitution by France and the
Netherlands in 2005 was one factor behind the euro's fall that
year. But analysts are divided on whether the Irish vote will
have much of an impact on the single currency this time.
The Australian dollar jumped 0.6 percent to $0.9401 <AUD=D4>
after Reserve Bank of Australia Governor Glenn Stevens suggested
a tight monetary policy remains essential for the country.
[]
G8 WATCH
Japanese Finance Minister Fukushiro Nukaga said on Friday he
may discuss foreign exchange issues with Paulson at the G8.
Paulson said earlier in the week he would never rule out
currency intervention as a potential policy tool to stem the
dollar's slide, giving the U.S. currency a boost.
His comments came just after Fed Chairman Ben Bernanke last
week surprised the market with a rare warning that a weak dollar
was adding to price pressures, signalling to investors a shift in
Washington's view on the dollar.
Market players will look for clues on whether the United
States will back its words with action and whether other
governments will support intervention when G8 finance ministers
gather on Saturday in Osaka in central Japan. []
(Editing by Hugh Lawson)
