* Dollar drifts higher after promising U.S. data
* Euro pinned down by expectations of ECB easing
* Developments in Thailand after military coup eyed
By Ian Chua
SYDNEY, May 23 The dollar hovered at one-week
highs against the yen and held its ground on the euro early on
Friday, having drifted up broadly after promising U.S. housing
and factory activity data gave Treasury yields a bit of a lift.
The dollar index last traded at 80.228 after edging
up 0.2 percent on Thursday. Against the yen, the greenback stood
at 101.79, not far from the overnight high of 101.82 and
well off a 3-1/2 month trough of 100.80 plumbed on Wednesday.
The euro eased to $1.3654 after suffering a 0.2
percent decline. It was within sight of a three-month low of
$1.3634 set on Wednesday.
In a lacklustre session, investors found an excuse to buy
greenback after data showed U.S. home resales rose in April and
the supply of properties on the market hit its highest level in
nearly two years, promising signs for the housing
Financial data firm Markit, meanwhile, said its preliminary
or "flash" U.S. Manufacturing Purchasing Managers Index rose to
56.2 in May from 55.4 in April. Economists polled by Reuters
expected a reading of 55.5.
U.S. Treasury yields edged up on the data with the benchmark
yield briefly hitting a 1-1/2 week high of 2.57
In Europe, surveys showed a slight softening in the strong
pace of growth in the private sector with France's composite PMI
slipping back below the 50 mark after just two months in growth
The composite output price index held steady at April's
eight-month low as firms discounted prices for the 26th month
running, an outcome that should keep the European Central Bank
(ECB) worried about persistently low inflation.
"We continue to run short EURGBP, short EURCAD and short
EURNOK recommendations ahead of the likely easing from the ECB
in June," analysts at BNP Paribas wrote in a note to clients.
Analysts polled by Reuters this week expect the ECB will cut
its main interest rate and push the deposit rate below zero next
month in an attempt to stop inflation from slowing any further.
Also keeping euro bulls at bay is some worry that the EU
elections could destabilise some euro zone governments at home.
In Italy, for example, a poor result for Prime Minister Matteo
Renzi's party could weaken his drive for swift reforms that he
promised when he took power in a party coup.
The bulk of countries vote on Sunday, when the trend towards
the political extremes may become clearer. Consolidated results,
including the allotment of seats in the parliament, will be
announced at around 2100 GMT on Sunday.
In Asia, investors will be keeping an eye on developments in
Thailand amid a dearth of major economic data.
On Thursday, Thailand's army chief seized control of the
government two days after he declared martial law, saying the
military had to restore order and push through reforms after six
months of turmoil.
The Thai baht had weakened on the news, slipping to around
32.6 per U.S. dollar on Thursday.
(Editing by Shri Navaratnam)