Dollar firm after Fed president's comments; U.S. data in focus

Forex

The dollar held firm on Friday, supported by comments from a senior Federal Reserve official suggesting a U.S. interest rate increase this year is still a real possibility as inflation pressures emerge.

The dollar's index against a basket of six major currencies .DXY =USD edged up 0.1 percent to 95.903, having pulled up from this week's low of 95.442 touched on Wednesday. For the week, the dollar index was still down about 0.3 percent.

"The dollar appears to be on a much more solid footing than when markets were worried about the impact of Brexit. It may take time a bit but its direction is clearly looking upwards," said Koji Fukaya, CEO of FPG Securities.

Against the yen JPY=, the dollar edged up 0.1 percent to 102.04 yen, having pulled up from this week's low near 101 yen.

The euro EUR= held steady at $1.1140 after retreating from Thursday's high of $1.1192.

San Francisco Fed President John Williams said in an interview with the Washington Post published on Thursday that the Fed should raise rates this year because of improving labor market conditions and the likelihood that inflation is heading higher.

Although a strong reading on U.S. payrolls data last Friday boosted optimism about the U.S. economy, many investors are still far from convinced the Fed can raise interest rates because of an uncertain global economic outlook.

Concerns about a slowing Chinese economy are one of the major issues currently on investors' minds, given that China has been the biggest contributor to global growth for a long time.

Chinese data on Friday underscored such concerns. China's industrial output and retail sales in July rose less than expected. Growth in fixed asset investment in the January to July period also missed forecasts and slipped to the lowest year-to-date rate in more than 16 years.

Market reaction to the data was limited, possibly due to hopes among market participants that Chinese authorities will take measures to support economic growth, said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.

"I'm still worried about these results, even though the market didn't react much. There is no way that you can say they are good," he said.

Source by Reuters