SINGAPORE - The dollar paused on Friday after a rise in jobless claims in the United States implied possibly easing conditions in the labour market and tempered expectations for further rate hikes from the Federal ReserveFederal Reserve.
In Asia, moves were subdued as markets remained on guard ahead of the Bank of Japan's BOJ monetary policy decision at the conclusion of a policy meeting, which was chaired by the current BOJ Governor Haruhiko Kuroda before he steps down in April.
The yen held steady in early Asia trade, but was last 0.2% higher at 135.89 per dollar, retreating from a nearly three-month low earlier in the week.
The BOJ is expected to maintain ultra low interest rates on Friday and not change its controversial bond-yield control policy, leaving options open ahead of a leadership transition in April.
In theory, it is a non-event, but there is a non-zero chance that Kuroda goes out with a bang and alters yield curve control, said Chris Weston, head of research at Pepperstone.
The BOJ has remained dovish in recent weeks, while interest rate expectations in the United States have gone up in recent weeks, as the yen has come under downward pressure.
That has caused the yen to fall from January highs and reversing a rally that followed a surprise tweak to yield curve control by the BOJ in December.
The U.S. dollar fell marginally on Friday.
The euro rose by 0.13% to $1.0595, while sterling was 0.05% higher to $1.1932, which is some distance from multi-month lows hit on Wednesday.
The kiwi gained 0.07% to $0.6106, but the Aussie fell 0.13% to $0.6582.
The number of Americans filing new unemployment benefits increased by the most in five months last week, despite the tight labor market, according to the data released on Thursday.
The jump in jobless claims was enough to cause traders to unwind some bets that U.S. rates would rise much higher than previously expected. Futures pricing means a roughly 54% chance that the Fed will raise rates by 50 basis points this month, compared to 70% before the data release.
The Fed funds rate is projected to peak at just below 5.5% by July.
The U.S. dollar index fell by 0.12% to 105.12 against a basket of currencies, but remained on track for a weekly gain of nearly 0.6%. It surged earlier in the week after Fed Chair Jerome Powell struck a more hawkish tone than markets had expected at his semi-annual testimony before the Senate Banking Committee.
The next big data point that could give clues on the Fed's next steps for monetary policy is now being looked at in the closely watched nonfarm payrolls report due later on Friday.
Non-farm payrolls, according to the survey of economists, increased by 205,000 jobs in February after surging by 517,000 in January.
Jarrod Kerr, chief economist at Kiwibank, said the payrolls report has surprised us on the high side for about 10 straight months now, so it's been a sign of real strength for the U.S. economy.
It is a little frustrating for the Fed. They've tightened a lot, hoping it'll have an effect. In recent months we have seen a bounce back in a lot of activities indicators. It looks like the job is not done.