* Dollar index off three-week peak but still well supported
* Markets seek more policy clarity from string of Fed
* China yuan also in focus after this week's big tumble
* Japanese markets shut for holiday
By Ian Chua
SYDNEY, March 21 The U.S. dollar hovered near a
three-week peak against a basket of major currencies early on
Friday, but could struggle to extend gains as investors awaited
more clarity on the Federal Reserve's policy path.
Fed officials including Richard Fisher, James Bullard and
Narayana Kocherlakota are all due to speak later on Friday,
after Fed Chair Janet Yellen surprised markets mid-week by
suggesting the possibility of raising interest rates early next
U.S. yields have all moved higher as markets brought forward
the risk of a Fed rate hike by April. The dollar index last
traded at 80.192, not far from the high of 80.354, a
level not seen since late February.
"A heavy Fed speaker calendar Friday will be carefully
parsed for any effort to roll back this week's shift forward in
tightening expectations," analysts at BNP Paribas wrote in a
note to clients.
However, they noted that most of the Fed speakers are
generally on the hawkish end of the spectrum.
"In any event, we would expect the Fed to struggle to fully
reverse the move in rates...unless data begins to significantly
disappoint expectations once again."
U.S. data on Thursday was mixed but a rebound in factory
activity in the Mid-Atlantic region held out hope the economy
might be regaining strength after being hobbled by severe
The euro wallowed at $1.3777, having plumbed a
two-week low of $1.3749. It was on track to post a 1.0 percent
drop this week.
Not helping the common currency, European Central Bank
Executive Board member Sabine Lautenschlaeger said rates will
remain low or go even lower for an extended period.
Against the yen, the euro eased to 141.07 yen,
back near the lower-end of this week's 140.46-141.97 range.
The U.S. dollar struggled to make further gains on the
Japanese currency after topping out at 102.69 on
Wednesday. It last stood at 102.39.
The greenback also lost steam against the Canadian and
Australian dollars. It last traded at C$1.1237 after
reaching a 4-1/2 year high of C$1.1279, while the Aussie popped
back above 90 U.S. cents from a low of $0.8995.
Trading in Asia is expected to be subdued with Japanese
financial markets shut for a holiday.
There is little in the way of key economic data out of Asia
on Friday although investors will be keeping a close eye on the
yuan, which skidded to its lowest in more than a year
at 6.2334 per dollar.
The Chinese currency is facing the prospect of posting its
biggest weekly loss since 1992 after the People's Bank of China
at the weekend doubled the currency's trading range to 2 percent
either side of the midpoint it fixes daily.
Markets, already fretting about slower growth in the world's
second biggest economy, fear the sharp drop in the yuan could
add more pressure on Chinese companies saddled with foreign
(Editing by Shri Navaratnam)